Huawei shifting chip production to domestic players to face U.S. restriction

Huawei Technologies Co Ltd is progressively diverting production of its own designed chips from Taiwan Semiconductor Manufacturing Co Ltd (TSMC) to a China-based smaller firm, reported Reuters, citing sources familiar with the matter.

Moving its chip production towards Shanghai-based Semiconductor Manufacturing International Corp (SMIC) is largely because of presence of that firm in mainland China, as the Chinese tech giant is preparing itself to deal with more restriction likely to be imposed by the United States, said the sources.

U.S. has been preparing new regulations around the Chinese firms especially Huawei, for which foreign companies making chips using U.S. equipments would required to obtain a license before supply of chips to Huawei, and those rules would definitely be hurting TSMC’s business.

Huawei’s latest move also describes how the U.S. restrictions are fueling up the efforts of Chinese firms to develop and rely upon their homegrown technologies.

In late last year, Huawei’s chip designing unit HiSilicon started directing some of its engineers to design chips to be made at SMIC, said one of the source with request of anonymity.

Previously, Huawei, for most of the time, remained focused in working only with the industry’s top manufacturers and SMIC was just a second-tier player, but now Huawei is shifting its focus and is moving resources to speed up its efforts in helping SMIC, the source said.

It is a “common industry practice”, said a Huawei spokesman in a statement to Reuters, referring to the company’s latest move. When it comes to choose a semiconductor manufacturing facility, Huawei carefully review the matters like technology, delivery and capacity of thatfacility, said the statement.

TSMC is the world’s top contract manufacturer of semiconductors whose 13% to 15% revenue came from making chips for Huawei which is the world’s biggest maker of telecom network equipment and a major smartphone manufacturer.

Details of production being outsourced to SMIC were not known yet but Huawei said South Korean, mainland China and other Taiwanese firms could also be alternative chip sources.