US-China tech war: Huawei’s chip unit HiSilicon to see massive decline in 5G chip market this year

HiSilicon, Huawei Technologies Co’s integrated circuit (IC) design unit, is expected to be the biggest loser in the 5G smartphone chipset market in 2021 as US company Qualcomm and Taiwan’s MediaTek expand their presence, according to a new research note published by Counterpoint.

The Chinese chip firm had 23 per cent of the 5G phone chipset market in 2020, but it is expected to see that share shrink to less than 5 per cent this year. Its share of overall global smartphone chipsets, which includes 4G, is expected to shrink from 10 per cent in 2020 to about 3 per cent this year, dropping out from the top five players, according to Counterpoint.

The decline of HiSilicon’s business is a direct result of the US government’s tightened sanctions last summer, barring semiconductor companies from supplying Shenzhen-based Huawei with chips made using US technology without prior approval, effectively severing the Chinese telecom giant’s access to advanced semiconductors.

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Huawei did not immediately reply to a request for comment.

HiSilicon was responsible for designing the Kirin processors for Huawei‘s smartphones. However, as the company has no chip manufacturing capacity of its own, it outsourced wafer fabrication to foundries like Taiwan Semiconductor Manufacturing Co (TSMC). But under the tighter US sanctions, HiSilicon can no longer do business with TSMC or other foundries because they all rely to some extent on core US technology to make wafers.

Huawei’s rotating chairman Eric Xu Zhijun said last month that the company will keep its HiSilicon chip unit for as long as it can, despite the fact that it cannot find a foundry to make its chips.

HiSilicon’s loss has been MediaTek’s gain, with the fortunes of the Taiwan-based chip designer rising amid US-China tech tensions. This year, MediaTek retained its top spot in the so-called fabless chip maker rankings over US-based Qualcomm, Counterpoint research shows.

The decline of HiSilicon’s business is a direct result of the US government’s tightened sanctions last summer. Photo: Reuters

MediaTek, which designs processors for mobile applications, is the major supplier to Chinese smartphone vendors like Xiaomi, Oppo and Vivo, which have collectively soaked up market share from Huawei after its handset business was crippled by US sanctions.

MediaTek is expected to account for 37 per cent of the global mobile chipset market this year, ahead of Qualcomm with 31 per cent, Counterpoint said. Last year, MediaTek overtook Qualcomm to become the largest supplier in this market, with a share of 32 per cent versus 28 per cent for the US company.

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“MediaTek is likely to continue its momentum [from] the fourth quarter last year into 2021,” Counterpoint research director Dale Gai said in the research note. “The potential annual uptick in demand is a function of a competitive 5G portfolio powering sub-US$150 5G smartphone [chips] manufactured at TSMC without any supply constraint, and growing share in the 4G segment.”

He added that in the first half, MediaTek would benefit from Qualcomm’s current supply constraints caused by disruptions at Samsung Electronics’ Austin, Texas, wafer fab, where a deep freeze in February caused widespread power outages in the state.

However, Qualcomm still leads in 5G chipsets with its market share expected to reach 30 per cent in 2021, followed by Apple and MediaTek with 29 per cent and 28 per cent, respectively.

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