Huawei Might Exit Smartphone Business Following U.S. Sanctions Believes Analyst

Render of the Huawei Kirin 990. Image: Huawei Technologies

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Trade tensions between the United States and China, compounded by the former's sanctions on Huawei Technolgies Inc. have increased over the past few months. The latest development in the arena came when the United States Department of Commerce tightened its noose around the company's ability to secure semiconductors manufactured using software and equipment originating inside the U.S. and added dozens of Huawei's affiliates located all over the globe to its infamous Entity List.

These ensure that any hope that Huawei has for securing access to leading-edge semiconductors that are vital for the company to keep up with its peers in the smartphone world is based on whether the Commerce Department chooses to grant third-party suppliers with licenses. With Taiwanese company MediaTek already having applied for this permission, analyst Ming-Chi Kuo is back today with his comments about the entire affair – and Kuo's take isn't for the light-hearted.

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Huawei's Best-Case Scenario In Post-Sanctions Era Is To Lose Smartphone Market Share Believes Kuo

In his analysts, Kuo highlights two scenarios that Huawei should face in the aftermath of the U.S. government's latest sanctions. According to him, regardless of the company's ability to secure chips for its smartphones after September 15th, when the sanctions take effect, Huawei has two scenarios ahead of it.

In the best case, the company will end up losing market share, especially in China to its competitors who are able to provide consumers with the latest processors in their smartphones. In the worst case, Kuo believes that Huawei might be forced to exit the smartphone world altogether as it struggles to procure advanced components for its devices.

In the first case, Kuo believes that a transfer of market share, especially in China, from Huawei to its competitors will also slow down the trend of technological upgrades in the country's smartphone market.


This will be due to the fact that since Huawei will be unable to equip its phones with the latest hardware, its competitors will find little incentive to keep up with the trend of upgrades in the smartphone world believes the analyst. However, it's a line of argument that makes little sense especially since Cupertino tech giant Apple Inc's iPhones and processors and modems manufactured by Qualcomm Incorporated also have a presence in the Chinese market.

Qualcomm's processors, which are also manufactured through the same 'nodes' as Huawei's chips are, have often outperformed the latter's products in benchmarks - which are tests designed to evaluate a gadget's performance. In the wake of the latest American sanctions, MediaTek has been reported to be the strongest candidate for providing Huawei with the critical components, yet even if the company does secure access to the Helio processor lineup, it is still likely to struggle when competing with Qualcomm's Snapdragon processors.

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In addition to Apple's iPhone, smartphones from most companies owned by the BBK Group (Oppo, Realme, OnePlus and Vivo) use Qualcomm's processors and are available for purchase in China. MediaTek also sells its devices in the country, and should the company secure approval for providing Huawei with its processors, then Huawei will have to ensure that its smartphones have other key differentiating factors that make them a worthy purchase over similarly spec'd MediaTek smartphones.

As part of its efforts to develop in-house chip manufacturing, Huawei has been rumored to be looking into plans for setting up its own fabrication lines – rumors which company officials have denied. It has also stepped up efforts to recruit Chinese university graduates to beef up its research and development as it looks to operate at multiple fronts for mitigating the impact on its operations from the sanctions.

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