Huawei’s future at stake: the company won’t get any more advanced chips

The Chinese tech giant Huawei is hit hard again. The company, which has become increasingly popular on the smartphone market in recent years, will no longer be able to buy advanced chips from next Tuesday. First Huawei had to do without Googles download shop Play Store, which made the phones less interesting for the Western market.

The fact that it is no longer getting chips is due to US sanctions, which were announced in May and August. Huawei will no longer be supplied with its own designs of chips, because the manufacturers use American equipment and software in the production process. Also, the tech giant will no longer be able to buy chips from other manufacturers

Manufacturers working with American equipment or software are forbidden to produce for the Chinese tech giant. As a result, major chip suppliers to Huawei, TSMC and Samsung, can no longer supply the company.

That is a problem for the production of Huaweis high-end smartphones, said a top executive Huawei in August. This is a big loss for us, this may be the last year that we will be able to make advanced chips ourselves

No endless supply of chips

The company has probably built up a chip stock for a couple of months. After that there will be an uncertain time, says Marc Hesselink, tech analyst at ING. In the meantime, development continues and chips are becoming more sophisticated, but the company is not going to get those chips

The sanctions affect not only the smartphone division, says Hesselink, but also 5G. If you are going to build a network, do you still want to work with the party that can no longer supply the latest technology? Youll have to think about that

It was one of the reasons for the United Kingdom to ban Huaweis 5G equipment. Minister Grapperhaus of Justice and Security recently wrote to the House of Representatives saying that telecoms providers are still talking about limited influence on business operations and that they are taking measures.

So the challenge for Huawei will be to produce chips that do not require American technology or patents. If that is possible, then the resulting phones are not as good as Apples and Samsungs, says analyst Hesselink. While the company wants to compete with them. Account is taken of the fact that, as a result, it is over and out for Huawei.

The US has found the weakness in the Chinese tech pyramid, says Hesselink. The Achilles heel of the country is chip production. They are aware of this themselves, which is why they are investing massively in it. But without the right machines you wont get very far It is true that China has its own chip production, but it is not as advanced as that of foreign parties.

Huaweis market share in the Netherlands has grown significantly since 2012, but this share has been declining since last year, according to figures from research agency Telecompaper:

In addition, companies will be reluctant to do business with Huawei, says Tim Wijkman, an analyst at Telecompaper. The fear of companies is that they will kick the shins out of the US. So companies will be very cautious about delivering. America is in control.

It is a blow to blow for the Chinese group, which has been under fire in Washington for a long time. The Trump government fears that Huawei, because of its links with the Chinese authorities, may carry out espionage and sabotage activities on their behalf. Huawei has always contradicted this.

Android licence revoked

Last year the US already made it impossible for Huawei to continue using an Android license through another sanction. The company needs it to install Googles download shop, the Play Store, and popular Google services such as Maps and YouTube.

The alternative offered by Huawei, its own download shop, is not a success in Europe, says Wijkman. We are seeing a considerable decline in interest in Huawei devices This image is recognised by tech site Tweakers, which is showing interest in telephone brands from its community through its Pricewatch. The Chinese company was able to count on a share of ten percent in April 2019, which has now halved.