Huawei’s place as the world leader in telecommunications is at stake: Taiwain Semiconductor Manufactoring Company (TSMC), the world’s leading manufacturer of electronic chips, announced on Thursday July 16 that it was complying with American sanctions and had stopped taking orders from Huawei since mid-May. TSMC will end its deliveries to the Chinese giant in mid-September, at the end of the three-month delay. For Huawei, it is the survival of the company at the forefront of the telecoms that is in question, as admitted by the interim CEO of Huawei, Guo Ping, on May 18, after the announcement of the new sanctions.
The Taiwanese company confirmed obeying US sanctions when it released its second quarter results: sales up 28.9% thanks to orders for new generation chips linked to 5G. With Huawei, TSMC loses its second client after Apple, and 14% of its turnover, collateral damage from the Sino-American technological rivalry. Uncertainty hung over TSMC’s attitude because the text of the American ban had legal loopholes. But the leader of the group finally explained to bend to the intention of the American administration. Despite the announcement, the world’s leading chip burner is forecasting 20% business growth in 2020.
Alternatives to TSMC are rare
For Huawei, however, the future looks complicated. TSMC used to manufacture Kirin chips – among the best in the industry – developed by Huawei’s subsidiary HiSilicon. The impact should be felt within a year for the Chinese giant. “It takes 12 to 18 months to develop a chip. So the smartphone chips that will be on the market until early 2021 are already in production. It is for the next generation that Huawei risks getting stuck ”, explains Patrick Yue, professor at the Hong Kong University of Science and Technology and director of the university’s Integrated Circuit Design Center.
Alternatives to TSMC are rare. After the Taiwanese, the Korean Samsung is the most advanced in chip production. But the US ruling in May bans any company that uses US components from selling to Huawei. One way to hit the Chinese one step up in the supply chain, compared to previous sanctions, which cut Huawei off from US companies.
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