Huawei, the Chinese telecommunications giant, has continued to grapple with challenges arising from the 2019 US sanctions. We dive deeper into the recent developments where Huawei finds itself compelled to give precedence to the production of its Artificial Intelligence (AI) chips, impacting the Mate 60 smartphone line.
Huawei’s Background and Sanctions
Huawei, a key player in the telecommunications industry, has long been under scrutiny by the U.S. defence and intelligence communities, who have raised concerns about its alleged ties to Beijing’s government.
In 2019, former US President Donald Trump imposed sanctions on Huawei, placing it on an export blacklist and restricting its access to critical U.S.-origin technology. The primary objective was to address security risks associated with Huawei’s purported links to the Chinese government, an assertion vehemently denied by the company.
The sanctions have significantly affected their mobile phone business, particularly hindering its ability to design its own chips and source components from external vendors. Despite these challenges, they have strategically responded by stockpiling chips, investing in research and development, and diversifying its supply chain.
Related: Huawei Building Secret Network for Chips, Trade Group Warns
Resurgence in the Chinese Smartphone Market
Despite the hurdles, Huawei experienced remarkable growth on its home turf in 2023. Shipments increased by 36.2% in Q4, making them the fourth-largest smartphone brand in China. A Counterpoint Research report revealed that they secured the top spot in smartphone sales during the first two weeks of 2024, marking a significant achievement since the 2019 U.S. ban.
The success is attributed to the Mate 60 series, featuring the Kirin 9000S processor and Harmony OS operating system. Canalys reports a 47% increase in shipments in Q4 2023, signalling a rebound in the Chinese smartphone market.
Also Read: What Drive China’s Ban on iPhones for Officials and State Employees in 2023
AI Chip Demand and Production Constraints
However, recent developments indicate a shift in Huawei’s production priorities. A Reuters report reveals that the soaring demand for their AI chips, coupled with manufacturing constraints, has compelled the tech giant to slow down production for its premium Mate 60 phones.
Huawei employs a single facility for both Ascend AI chips and Kirin chips used in its smartphones. Production efficiency has been hampered by a low yield rate, a measure of production quality. The global race for AI functionality amid the Sino-U.S. technological standoff has forced them to make a strategic decision.
The Global AI Chip Competition
As the U.S. restrictions on sales of AI processing chips to China took effect, Huawei found itself in a race for AI supremacy. The Ascend 910B, considered the most competitive non-NVIDIA AI chip in China, became a focal point. The government’s initiative to enhance China’s computing power has led to increased demand for the Ascend series, particularly the Ascend 910B.
The competition in the AI chip market has intensified, with Chinese companies seeking domestic alternatives to highly sought-after AI chips like NVIDIA’s H100. The Ascend chips have become a preferred choice for AI developers, contributing to the company’s strategic importance in the evolving landscape.
Huawei’s Production Adjustment
Huawei’s response to the heightened demand for AI chips has been to prioritise the production of Ascend chips over Kirin chips, resulting in a slowdown in the manufacturing of Mate 60 smartphones. The company is actively working to improve the yield rate, hoping that the production adjustment is a short-term measure.
The decision to scale back smartphone production in favour of AI chip manufacturing provides a rare glimpse into Huawei’s challenges since the U.S. sanctions in 2019. The company, despite facing obstacles, has successfully adapted to the evolving market dynamics and remained resilient.
Government Initiatives and Industry Impact
The Chinese government’s initiative to strengthen the country’s position in computing power has triggered a wave of data centre projects and increased demand for AI chips. The Ascend 910B, being widely regarded as a competitive non-NVIDIA AI chip, has seen a surge in interest.
The impact of US restrictions on chip exports has redirected the focus to domestic alternatives, with Huawei at the forefront. While NVIDIA once dominated the Chinese AI chip market, the latest curbs have opened opportunities for Huawei and other domestic players.
Looking Ahead: AI Chips Can Be The Next Best Technology
The decision to prioritise AI chip production over smartphones signals the company’s strategic foresight in a rapidly evolving industry. The global AI chip competition, coupled with geopolitical tensions, has reshaped the dynamics of technology markets.
Huawei’s journey since the U.S. sanctions in 2019 has been marked by resilience and adaptability. The exclusive insights into the AI chip demand forcing a shift in production priorities underscore Huawei’s strategic importance in the evolving landscape of technology and geopolitics.
As the company navigates these challenges, its ability to balance the demands of the AI chip market with its established position in the smartphone industry will be a critical factor in shaping its future trajectory. To know more about Huawei’s journey towards AI dominance in the competitive market, be sure to bookmark our website so you will be the first to know about the news.