Huawei Chips Achieve 100% Domestic Production!

In a remarkable technological endeavor, Huawei has achieved a significant milestone by realizing 100% domestically produced chipsThis breakthrough was announced by He Gang, the CEO of Huawei's consumer business, who confirmed that every chip embedded in the latest Huawei Mate 70 is entirely sourced from the domestic supply chainThis accomplishment signifies a turning point for Huawei, marking its strength in chip innovation and manufacturing within the rigid confines of international tech restrictions.

The rationale behind Huawei's ability to reach this level of domestic chip production derives from two main strategiesFirst, the company has strategically lowered its process technology requirementsDue to geopolitical tensions, particularly restrictions on high-end EUV lithography machines from ASML—an industry leader—Huawei faced limitations on its fabrication capabilities

Under the current technological conditions, existing DUV lithography processes can only accommodate chips down to 7 nanometers, a significant step behind industry leaders like Apple and Qualcomm, who have successfully transitioned to 4nm chips through TSMC's advanced services.

However, it is crucial to note that despite potentially lower specifications, the performance gap between a 7nm chip and a 4nm chip has shrunk considerablyWith smartphone performance reaching extreme levels since the advent of 7nm technology, significant differences in user experience are seldom noticeableA 7nm chip can offer comparable fluidity, functionality, and intelligence features to its smaller counterpartTherefore, the concern regarding performance lags in Huawei's new offerings may be overstated.

Moreover, technology advancement in chip manufacturing is nearing its limitsThe progression of smartphones alongside chip evolution points to a plateauing phase in innovation, where marginal gains become less perceptible to consumers.

The second major reason behind Huawei's success is the maturation of the domestic supply chain

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Unlike brands that focus primarily on chip manufacturing, such as TSMC or Samsung, Huawei, like Apple and Qualcomm, specializes in chip design and developmentThus, effective outcomes in manufacturing necessitate robust partnerships across the supply chainXiaomi's president, Lu Weibing, has previously remarked that a typical smartphone comprises around 114 chipsFor Huawei, breakthroughs in production primarily hinge on the availability of key components, particularly the crucial 5G CPUs and other integrated circuit components including baseband chips, power management ICs, and fingerprint recognition chips.

This domestic supply chain increasingly accommodates many categories of chipsCompanies like Goodix are leading China’s fingerprint recognition segment while Yangtze Memory Technologies is noted for its prowess in memory chip manufacturingNotably, a large chunk of global chip production—over 70%—still utilizes established nodes of 28nm or larger, creating room for companies such as SMIC and Huahong Semiconductor to sustain competitive viability without relying on cutting-edge 5nm processes.

With the Mate 70 smartphone, Huawei effectively showcases the pinnacle of China’s local chip supply capability

Should scenarios arise where rival companies such as OPPO or Xiaomi face suppression similar to what Huawei has endured, they too could readily pivot towards the domestic supply network to maintain competitivenessThis evolution underscores a critical takeaway: excelling in the premium mobile market doesn't necessitate the use of top-tier chip manufacturing techniques.

While OPPO and Xiaomi leverage 4nm Qualcomm chips, they continue to struggle to penetrate the high-end segmentIn contrast, Huawei’s strategic use of its domestically produced 7nm chip has successfully positioned it back at the forefront of the Chinese premium marketIn many instances, the resilience and determination a company showcases in adversity can instill loyalty and affinity among consumers.

Amidst these tectonic shifts, OPPO appears to be grappling with significant regretsUnder pressure, the company made the drastic decision to disband its Zepp company right before the mass production of its 5G chip, a move that undermined its prospects in premium sectors

The resultant shrinking visibility and revenue have compelled OPPO to halt the construction of its headquarters in Hangzhou.

Meanwhile, Xiaomi’s founder Lei Jun's ventures into the automotive sector illustrate a proactive adaptation to the volatile semiconductor landscapeBy diversifying into car manufacturing, Xiaomi aims to mitigate its vulnerability to chip supply disruptions, emphasizing the precarious nature of its smartphone-dominated ecosystemThe challenge remains that if Xiaomi faces treatment similar to that meted out to Huawei, its endurance may be at stake, exposing its entire operational framework to severe consequences.

Thus, to navigate these turbulent times, Xiaomi's approach to venture into automotive technology reflects a strategic retreat from direct confrontations in the chip war.

In contrast, OPPO’s primary downfall lies in its inability to discover alternative growth avenues while remaining shackled to dependency on American semiconductors

If the upheaval in the smartphone sector continues, a survival-of-the-fittest scenario loomsWhile specific firms like Apple in the U.Sand Samsung in South Korea dominate their markets, China's landscape teems with multiple formidable players—including Huawei, Xiaomi, OPPO, VIVO, and Honor—resulting in fierce competitionThe current market bears witness to new beginnings amidst persistent rivalries.

Companies like Huawei and Xiaomi leverage cross-industry strategies such as automotive to elevate their positioning, while Lenovo continues to maintain its pedigree with market entries in the U.Sand strongholds in Brazil, Argentina, and IndiaConversely, Transsion all but monopolizes the African market, leaving fierce competition for OPPO, VIVO, and Honor in mid-tier segments, where battles will intensify to determine the ultimate survivors.

The relentless cycle of innovation, adaptation, and fierce competition within the Chinese smartphone market serves to underscore the transformative period