TSMC to Stick with Huawei

Article By : Alan Patterson

TSMC plans to continue making chips for Huawei even as other companies in the global semiconductor ecosystem are complying with a U.S. ban on supplies to the Chinese electronics company

Taiwan Semiconductor Manufacturing Company (TSMC) plans to continue making chips for Huawei even as other companies in the global semiconductor ecosystem are complying with a U.S. ban on supplies to the Chinese electronics company.

At its May 23rd technology symposium, TSMC said that after careful consideration, it will maintain its shipments to Huawei’s chip arm HiSilicon throughout this year. The world’s biggest foundry noted that any impact to one client could result in gains for another client.

While TSMC’s shipments to Huawei will continue, the halt of components and software from other suppliers may still have some impact on TSMC, according to Credit Suisse analyst Randy Abrams in comments emailed to EE Times.

The Trump administration earlier this month implemented the ban on Huawei — on accusations of aiding Beijing in cyber espionage — threatening to halt key supplies of U.S. software and semiconductors the Chinese company needs to make its products. The ban potentially threatens the existence of the world’s largest provider of telecommunications networking equipment and the second-ranked smartphone maker.

TSMC's likely 7nm customer mix in 2018 (Source: Bernstein)
TSMC’s likely 7nm customer mix in 2018 (Source: Bernstein)

TSMC said at its technology symposium that it doesn’t need to stop exports to Huawei as it does not have over 25% U.S.-origin technology in its manufacturing process. About 90% of TSMC’s labor and overhead are in Taiwan and a substantial portion of its blank silicon wafers are from Japan, Europe and Taiwan. The only sizeable U.S. inputs to TSMC are EDA software, IP and equipment, according to Abrams. 

“Even though TSMC is still shipping and expects to make up Huawei with gains at other customers, we still expect some impact due to TSMC’s higher share into Huawei,” Abrams said. TSMC may need to deplete some of their own inventory before ramping up new orders, he added.

HiSilicon accounts for about 10% of TSMC’s sales.

Global Impact
The Huawei ban could impact growth in the electronics industry and impede the global rollout of 5G, which is seen as one of the key drivers for business in coming years. Up to now, Huawei was seen as one of a few companies leading 5G development.

Huawei, which has overtaken Apple to become the new No. 2 in smartphones, last year was expected to increase its market share with the introduction the Kirin 980 chip from HiSilicon. TSMC makes the Kirin 980 using a 7-nm process.

While TSMC aims to stay the course with Huawei, IP supplier Arm has reportedly instructed all its employees to stop working with and supporting Huawei.

Infineon said it will continue to ship products to Huawei, and the German company denied a media report saying Infineon had suspended shipments to Huawei.

U.S. chipmakers including Intel, Qualcomm, Xilinx and Broadcom have told their employees they will not supply Huawei until further notice, according to a Bloomberg report. Google, Sunday, said that it cut off the supply of hardware and some software services to the Chinese mobile phone equipment giant. But on Monday, the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, according to Reuters.

Huawei faces numerous supply chain constraints from the ban including RF components, EDA software, FPGAs, high-end analog chips, software and operating systems, which will make life difficult for Huawei in export markets. Huawei smartphones will lose access to Google services and may be forced to use open source Android, Abrams said. Even Huawei smartphones sold in China will be less competitive if the ban remains during this year and next if the company lacks access to high-end RF chips, EDA software and IP, as well as Qualcomm chipsets, according to Abrams.

Huawei could lose as much as 75% of its share loss in smartphones by the fourth quarter of this year, based on Abrams’ estimates.


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