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On November 17, Huawei’s communications equipment maker officially announced that it will sell its Honor mobile phone brand. Once the transaction is complete, Huawei will no longer hold any shares in Honor. This official announcement confirms rumors that Huawei will sell the sub-brand to circumvent US sanctions on chip technology.
The buyer is Shenzhen Zhixin New Information Technology Co., Ltd., a jointly owned and founded company of over 30 agents and distributors of the Honor brand. In the eyes of the buyer, it is a “self-help and market-oriented investment initiated by the industrial chain linked to glory”.
The background of “self-help” is that Huawei faces the dilemma of a supply chain breakdown under US sanctions.
On May 15 this year, the United States Department of Commerce issued a ban. Any company sending semiconductor products containing US technology to Huawei must first obtain an export license from the US government. There is a buffer period of 120 days before the ban is implemented, and September 14 is the buffer period. The last day.
As of September 15, Huawei has entered a dark period of “broken core”. Not only Huawei itself, but all Huawei affiliates (152 companies in total) that are “affected by relatives” are included in the physical list, and the Honor brand is also affected.
Image source,xinhua
Chinese high-tech companies have increased their domestic supply demand after being sanctioned and limited by the United States, which has brought about $ 300 billion in investment opportunities for the development of China’s chip industry.
Huawei is not shy about the purpose of this transaction. According to Huawei, the consumer business is facing tremendous pressure due to the “unsustainable availability” of technical components in the mobile phone industry. The sale of Honor serves to ensure Honor’s survival. It was Honor’s agents and distributors who first proposed this transaction.
It is worth noting that Shenzhen Zhixin, as a buyer, was jointly invested and founded by Shenzhen Smart City Technology Development Group and the aforementioned agents and distributors. The group is a wholly owned municipal state enterprise of Shenzhen SASAC.
It is still unclear whether Honor can evade US sanctions and successfully get the chip supply in the international market after the cut.
Judging from the information currently released, this cut only involves the transfer of ownership and Honor’s executives and operations team remain unchanged. Shenzhen Zhixin plays more of a financial investor role.
In 2013, Huawei created the “Honor” mobile phone brand. Compared to the “Huawei” brand, it has a low-end positioning. It competes mainly with brands like Xiaomi. Each year, Huawei smartphone shipments exceed 70 million, occupying 10% of the Chinese mobile phone market.
It is strictly forbidden to order Huawei to “de-embellish”
Taking the lead in divesting Honor, on the one hand, may allow this sub-brand to operate independently and seek front-line vitality; on the other, the transaction will bring a lot of money to Huawei, allowing it to chart its own path to survival.
The reason for this is that, in the eyes of many analysts, the US ban on Huawei is so strong. Without US approval, Huawei is unlikely to be able to obtain chips from commercial sources. For this Chinese tech giant, even if he is not sentenced to death. Also equivalent to a suspended death sentence.
Well-known Tianfeng International analyst Guo Mingchi said that with the ban, the best-case scenario is for Huawei’s market share to decrease and the worst-case scenario is for Huawei to withdraw from the mobile phone market.
Image source,Reuters
Another reason is that, in the context of the Sino-US antagonism, Huawei, which holds the core technology, is the first. In a speech this year, United States Attorney General William Barr said that since the 19th century the United States has led the world in science and technology, making it prosperous and secure. As 5G is the future technology of the world industrial center, China can lead if it continues to lead. With the opportunities offered by a host of new technologies, the United States will lose its ability to sanction.
Therefore, the US views China as a long-term competitor, and Huawei, which masters 5G, will also become a long-term target of US sanctions. While the White House is about to change hands after this year’s US election, this is likely to remain the same.
Gary Hufbauer, senior researcher at the Peterson Institute for International Economics, told BBC Chinese that the trade war and technology war between China and the United States evolved into part of the “Second Cold War” and the situation could fluctuate. For example, compared to Trump, Biden may be verbally relaxed, but Sino-US relations are virtually impossible to go back to the Bush and Obama era.
Overall, the strict ban made Huawei insurmountable. The Sino-US diplomatic situation is likely to continue for a long time. Under the influence of two factors, even if Huawei intends to gradually shrink to the Chinese domestic market, if it wants to survive it can only build itself and go to the United States. “Increased” chip production capacity.
From scratch, a chip has to go through design, manufacturing, packaging and testing. In the packaging and testing process with the lowest technical content, local Chinese companies can meet the needs of Huawei; although there are still barriers in the technical process, Huawei’s HiSilicon has accumulated some advantages; only in the production process, the litho machine of the Dutch company ASML is monopolized Status, and this company has a deep background funded by the United States, and China’s independent chip manufacturing capabilities are far behind.
However, Huawei has still grasped the only basics and taken the path of self-help.
Shortly before election day in the United States, the Financial Times quoted people familiar with the matter as saying that Huawei is planning to build a chip factory in Shanghai that does not use American technology. The partner is Shanghai Integrated Circuit R&D Center Co., Ltd. supported by the Shanghai Municipal Government.
According to the report, the plant is expected to start producing low-end 45-nanometer chips. The goal is to produce 28 nanometer chips for Internet of Things devices by the end of 2021 and 20 nanometer chips for 5G telecommunications equipment by the end of 2022. Although according to the plan, the factory will not be able to produce the most advanced 5nm chips within a few years, but it may bring the potential to “de-beautify” some of Huawei’s business.
And he really wants to independently break through the core technology of the chip industry, Ni Guangnan, an academic at the Chinese Academy of Engineering, previously warned that China must have the ideological preparation to “sit on the sidelines for ten years.” .
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