huawei‘s smartphone and 5G business will slow in 2021 as it is cut off from high-end chip sources by the United States. Some analysts said Huawei will likely focus more on software services such as cloud computing and IoT devices, but that is unlikely to offset the loss of smartphone and 5G telecom infrastructure business.
Reuters reported on Jan. 6 that analysts said Huawei’s smartphone and 5G business is likely to slow in 2021, and that it will likely focus on its software business.
Paul Triolo, head of global technology policy at Eurasia Group, said Huawei has always relied on TSMC to produce high-end chips for its cell phones, 5G network base stations, servers, cloud computing and artificial intelligence products, and the U.S. ban restricts Huawei’s access to high-end semiconductors, which touches on Huawei’s Achilles’ heel. Although Huawei stores a certain number of chips, there is a limit to how long the chips in stock can last.
The U.S. Department of Commerce blacklisted Huawei in May 2019 under national security concerns, which effectively banned U.S. companies from selling necessary U.S. technology to Huawei. in August 2020, the ban was extended to major suppliers such as TSMC. Outsiders believe that this is tantamount to a death sentence for Huawei.
In a report to clients, technology industry analyst Dan Wang said that sentencing Huawei to death does not equate to a quick execution; the process is more like a slow strangulation.
The impact will be felt most clearly by Huawei’s consumer business, which accounted for 54 percent of Huawei’s sales revenue in 2019, according to Wang Dan.
Some analysts say Huawei will likely focus more on its software services business, such as cloud computing and IoT devices, but that’s unlikely to offset losses in its smartphone and telecoms infrastructure businesses.
According to the latest data from market research firm Strategy Analytics, Huawei’s market share in the global 5G smartphone market will reach about 29.2% in 2020, surpassing Apple and Samsung Electronics, but under the influence of deteriorating U.S.-China relations, Huawei’s market share in 5G phones is expected to plummet to only about 3.4% in 2021.
In order to survive, Huawei announced at the end of 2020 to divest its low-end smartphone brand “Glory”, hoping to regain the source of chips.
Paul Triolo believes that Huawei may use the same tactics in its high-end product line in 2021.
Analysts say Huawei is expected to focus on the Chinese market as major markets like the U.K. and Japan ban Huawei 5G equipment.
Huawei has enough chips to produce about 500,000 5G base stations, said Edison Lee, an analyst at Fury Financial Group (Jefferies).
However, Edison Lee said the Chinese Communist government may slow down the 5G rollout to strike a balance between expanding technology coverage and waiting for Huawei to catch up, rather than exhausting its inventory all at once.
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