The Chips Are Up: Huawei Mass-Produces Mobiles With Mainland Chipmaker SMIC in Major Trade War Win

The world's largest IT equipment provider has begun manufacturing new smartphones with help from a major Shanghai-based semiconductor company, allowing the Chinese tech giant to scale back production with Taiwan processors, it was reported this week.

Chinese chipmaker Semiconductor Manufacturing International Corp has begun mass-producing smartphone processors for Huawei Technologies Co, boosting mainland China's semiconductor industry amid the ongoing US trade war.

The Shanghai-based semiconductor company produced Huawei's Kirin 710A chipset, commercialising China's chipmaking industry for smartphone processors for the first time in history, China Daily reported on Thursday.

Huawei will begin boosting production with the mainland producer and away from Hsinchu-based Taiwan Semiconductor Manufacturing Co over fears over further restrictions from the United States government.

Director-general for the telecom association Information Consumption Alliance, Xiang Ligang, confirmed as quoted by China Daily that Chinese mainland firms had conducted all design, manufacturing, testing and packaging.

"The line showcased SMIC's commercialization of its 14-nm technologies to make smartphone processors. It is a step from zero to one," Xiang said in a statement.

— Paul Triolo (@pstAsiatech) May 14, 2020

Employees receiving smartphones with the new chips will have "Powered by SMIC" on the back of units.

The news comes as SMIC saw 7.8 percent quarter-on-quarter (QoQ) increase in profits to $904.9m in 2020 Q1, up from $839.4m in 2019 Q4. Gross profits were up 17.1 percent QoQ in the first quarter this year at $233.6m, up from $199.4m in the fourth quarter last year, according to a company investor report.

“The company's revenue in the first quarter has reached a historical high of $905 million, an increase of 8% quarter over quarter, and 35% year over year, as market demand and product mix are better than expected. Revenue related to communications, computer and consumer electronics grew,gradually increasing in market share," Dr Zhao Haijin and Dr Liang Mong Song, SMIC co-chief executives said in a joint statement.

US Ramps Up 'Murky' Trade War Amid Chinese Gains, Losses

The news comes as the Trump administration extended commercial bans a further year on US firms buying and selling with Huawei, despite the US Commerce Department planning to extend licences allowing such firms to continue buying and selling with China's IT and smartphone giant, it was reported this week.

But Chinese chipmaking firm HiSilicon overtook the domestic mainland market amid Washington's trade war, topping San Diego-based firm Qualcomm for the first time in history with a 43.9 percent of the nation's market share. Roughly 22.21m smartphone processor unites were shipped in 2020 Q1, with Huawei's semiconductor wing avoiding a year-on-year loss in profits.

US authorities placed Huawei, ZTE and over 70 Chinese tech firms on an Entity List in May last year, citing national security concerns that Chinese technologies could be used to spy on countries at the behest of Chinese authorities.

Washington has not presented any evidence against Huawei or the Chinese government to date despite the allegations, which the latter two have sharply and repeatedly denied.