America’s war on the telecoms titan may boost Chinese technology

创造性破坏 Creative destruction-书迷号

HUAWEI IS ON the ropes. From midnight on September 14th the Chinese technology giant was cut off from essential supplies of semiconductors. Without chips it cannot make the smartphones or mobile-network gear on which its business depends. America’s latest rules, finalised on August 17th, prohibit companies worldwide from selling chips to Huawei if they have been made with American chipmaking kit. American semiconductor companies, for which Huawei has been a lucrative customer, have implored their government to extend the deadline, as have their industry bodies.

Huawei now looks likely to follow one of three paths. The first involves Washington granting licences to suppliers so that they can sell chips to the firm in a limited fashion. This would let Huawei stay in business—just about. MediaTek, a Taiwanese chipmaker that is one of its main suppliers, has petitioned America’s Department of Commerce (DoC) for such a permit. To keep Huawei’s edge blunt, suppliers keen to produce chips designed by its in-house semiconductor unit, HiSilicon, are unlikely to be issued such dispensation.

Even a debilitated Huawei may not satisfy America. The DoC’s default setting is to deny permits. That would force the Chinese firm to take more desperate action, such as making its own chips using older technology that could be sourced from supply chains that do not include American firms. Pierre Ferragu of New Street Research, a telecoms-and-technology research firm, expects Huawei to do this within 12 months.
对美国而言,让华为萎靡不振可能还不够。美国商务部的基本姿态是不予许可。这将迫使这家中国公司更孤注一掷,例如从不包含美国公司的供应链中获取较老旧的技术来自行制造芯片。电信与科技研究公司新街研究(New Street Research)的分析师皮埃尔·费拉居(Pierre Ferragu)预计华为会在12个月内这么做。

This path has just become rockier. On September 4th Reuters reported that America’s Department of Defence has proposed putting Semiconductor Manufacturing International Corporation (SMIC), China’s leading chipmaker, on the same blacklist as Huawei. The Pentagon alleges that SMIC works with China’s armed forces, and so poses a threat to national security. A blacklisting would destroy SMIC’s business, which relies on American machine tools. Its share price fell by almost a quarter on the news. SMIC denies having military ties and said it is in “complete shock”. The threat of such action may dissuade SMIC from teaming up with HiSilicon, as Huawei might have hoped.

This leaves the third eventuality. Huawei may go bust, or be forced to sell off bits of its business. This would not happen immediately: at the end of 2019 it had cash reserves of 371bn yuan ($53bn), enough to cover operating costs for a year and a half. But if push comes to shove, it may offload HiSilicon. Huawei’s chip-design arm is one of the most advanced such outfits in the world. According to IC Insights, a firm of analysts, HiSilicon broke into the global top-ten design companies by revenue in the first half of 2020, the first Chinese firm to do so. Since it will no longer be able to design chips for its owner after September 14th, HiSilicon could profitably focus on doing so for third parties in China. That would generate a new revenue stream for Huawei. If instead Huawei were forced to shut HiSilicon, its laid-off engineers would be snapped up by chip-design teams at other Chinese technology giants like Alibaba, Tencent and ByteDance. Or they could start new design firms of their own; many are said to be slipping out pre-emptively.
这样就只剩下第三条路。华为可能走向破产或被迫出售部分业务。这不会立即发生:到2019年底华为有3710亿元的现金储备,足够支撑一年半的运营。但到不得已时,它可能会剥离海思。华为的这个芯片设计部门是全球最先进的设计机构之一。据市场分析公司IC Insights的数据,按2020年上半年营收计算,海思已跻身全球十大芯片设计公司之列,创中国公司之先河。由于9月14日之后无法继续为华为设计芯片,海思可通过专注于替其他中国公司设计芯片而盈利。这将为华为带来新的收入。而假如华为被迫关掉海思,被遣散的工程师将被阿里巴巴、腾讯、字节跳动等其他中国科技巨头的芯片设计团队收入麾下。这些工程师也可能会自己创办新的设计公司,据说不少人已悄悄离职,以求占得先机。

Each scenario worries firms like Qualcomm. The big American chip-designer lists Chinese competition as a risk in its annual filings. Last year Chinese sales made up $11.6bn out of Qualcomm’s $24.3bn in revenue. A HiSilicon liberated from Huawei would threaten those sales.

Huawei is putting on a brave face. It says it will spend over $20bn on research and development this year, $5.8bn more than in 2019 and about as much as Amazon, a firm with double its sales. It hopes to gain new revenue streams less vulnerable to American attacks. These are unlikely to let up even if Joe Biden becomes president next year. But as Uncle Sam tightens the grip, it risks squeezing Chinese technology into a form which it no longer controls. Huawei hopes to hang on until then.■