Reuters: Huawei plans to return to the 5G smartphone market by the end of the year, overcoming US sanctions

Huawei Technologies, the Chinese technology giant, plans to return to the 5G smartphone market by the end of 2023, according to research firms, reports Reuters. The move marks a major recovery for the Chinese manufacturer after US sanctions hit its smartphone business hard.

Huawei is expected to procure 5G chips domestically using its own semiconductor design and chip manufacturing advances from Semiconductor Manufacturing International Co (SMIC), according to three third-party research firms that study the Chinese smartphone market. The firms, which chose to remain anonymous due to confidentiality agreements with clients, cited industry sources, including Huawei suppliers.

If the prediction comes true, the return to the 5G smartphone market will be a significant victory for Huawei, which has been in “survival” mode for almost three years. The company’s consumer business revenue peaked at 483 billion yuan ($67 billion) in 2020, but fell nearly 50% a year later.

Huawei, which once rivaled Apple and Samsung as the world’s biggest smartphone maker, has lost access to key chip-making tools needed to produce its most advanced models due to US restrictions imposed in 2019. The sanctions, which Huawei says are illegal, were imposed amid concerns from the US and European governments about security risks from the company’s ties to the Chinese government. Since then, Huawei has been selling only limited batches of 5G models using accumulated chip stocks.

Although sales of the latest generation of 4G smartphones are not driving growth, Huawei managed to maintain a 10% market share in China in the first quarter, according to data from consulting firm Canalys.

One research firm expects Huawei to use SMIC’s N+1 manufacturing process, although with a projected yield of usable chips below 50%, the supply of 5G models will be limited to around 2-4 million units. According to other estimates, the volume of supply may reach 10 million units.

Huawei could launch 5G versions of flagship models such as the P60 as early as this year, with new launches likely in early 2024, three research firms say. However, US sanctions have cut off Huawei from Google services, limiting the appeal of Huawei smartphones outside of China.

Research firms noted Huawei’s March announcement of a breakthrough in electronic design automation (EDA) tools for chips manufactured using 14 nanometer (nm) technology and above. They believe that Huawei’s EDA software can be used with SMIC’s N+1 manufacturing process to produce chips with a topological size of 7nm, the powerful semiconductors typically used in 5G smartphones.

However, a projected yield of less than 50% means such chips for 5G “going to be costly,” said Doug Fuller, who researches chips at Copenhagen Business School. “I guess if Huawei wants to eat the cost they can do this, but I don’t see such chips as price competitive,” Fuller said.