Huawei unit ships Chinese-made surveillance chips in fresh comeback sign -sources

Novatek Microelectronics

20/09/2023 08:05

(Adds hyperlink in paragraph 14; fixes typo in paragraph 3)
       BEIJING/SHANGHAI, Sept 20 (Reuters) - A Huawei
Technologies unit is shipping new Chinese-made chips for
surveillance cameras in a fresh sign the Chinese tech giant is
finding ways around four years of U.S. export controls, two
sources briefed on the unit's efforts said.
    The shipments to surveillance camera manufacturers from the
company's HiSilicon chip design unit started this year,
according to one of the sources, and a third source familiar
with the industry supply chain. One of the sources briefed on
the unit said at least some of the customers were Chinese.
    Huawei also unveiled new smartphones in recent weeks that
use advanced chips, which analysts say are domestically made.
The developments indicate the Chinese tech giant is overcoming
Washington's export controls, which since 2019 have barred it
from obtaining components and technology from U.S. firms without
approval.
    "These surveillance chips are relatively easy to manufacture
compared to smartphone processors," said the source familiar
with the surveillance camera industry's supply chain, adding
that HiSilicon's return would shake up the market. 
    A key factor is that the company appears to have worked
around U.S. restrictions on chip design software. Huawei in
March announced it had made breakthroughs in design tools for
chips produced at and above 14 nanometres - two to three
generations behind leading-edge technology, but an advance for
the company.
    HiSilicon mainly supplies chips for Huawei equipment but has
had external customers such as Dahua Technology  002236.SZ  and
Hikvision  002415.SZ . Before the U.S. export controls, it was
the dominant chip supplier to the surveillance camera sector,
with brokerage Southwest Securities estimating its global share
in 2018 at 60%. 
    By 2021, HiSilicon's global market share plummeted to just
3.9%, according to data from consulting firm Frost & Sullivan. 
    One of the sources briefed on the unit's efforts said that
HiSilicon had shipped some low-end surveillance chips since 2019
but that its focus was on the high-end arena and reclaiming
market share from the likes of Taiwan's Novatek Microelectronics
Corp  3034.TW .
    All three sources declined to be named because of the
sensitivity of the matter.
    Huawei declined to comment.
       
    HIGH-END TOOLS
    Huawei drew attention in late August when it rolled out the
Mate 60 Pro, a new smartphone that uses an advanced chip and
that users said was capable of 5G speeds. The event was cheered
by Chinese state media and the public as a comeback for Huawei's
smartphone business after it was crippled by the U.S. sanctions.
    Research firm TechInsights, which examined the Mate 60 Pro,
found that it was powered by a new Kirin 9000S, an advanced chip
it said was most likely made in China by China's top chip
foundry, Semiconductor Manufacturing International Corp (SMIC)
 0981.HK . 
    Huawei has not commented on the phone's 5G capabilities or
how it produced the advanced chip. The Kirin series has
historically been designed by HiSilicon, and before the U.S.
sanctions Huawei, worked with Taiwan's TSMC  2330.TW  to
manufacture it.
    The launch prompted calls from U.S. lawmakers to put
additional pressure and "more effective export controls" on
Huawei and China's top chip foundry, Semiconductor Manufacturing
International Corp (SMIC)  0981.HK .
    The United States has no evidence that Huawei can produce
smartphones with advanced chips in large volumes, U.S. Commerce
Secretary Gina Raimondo said on Tuesday.
    The U.S. sanctions have strangled HiSilicon's access to
electronic design automation (EDA) software from Cadence Design
Systems Inc  CDNS.O  and Synopsys Inc  SNPS.O , and Siemens AG's
  SIEGn.DE  Mentor Graphics. The three companies' products
dominate the chip-design sector, which produces blueprints for
chips before they are mass manufactured.
    TechInsights analyst Dan Hutcheson said their analysis of
the Mate 60 Pro and other components such as its radio frequency
power chip also suggested that Huawei had access to
sophisticated EDA tools that "they are not supposed to have". 
    "We don't know if they got them illicitly, or more probably
the Chinese developed their own EDA tools," he said.
    

 (Reporting by Beijing and Shanghai Newsrooms and Fanny Potkin
in Singapore; Editing by Gerry Doyle)