Qualcomm pushes for permission to sell Huawei 5G chips – report

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Qualcomm and Huawei reached a settlement and entered into a long-term global patent license agreement in July. (Qualcomm)

Qualcomm has been working to sway the U.S. government for permission to sell smartphone chipsets including 5G chips to Huawei, warning that export restrictions only stand to hand billions of dollars to competitors, according to the Wall Street Journal. Meanwhile, the Chinese tech giant said U.S. sanctions are forcing partners to stop production of its own advanced processor chips

News of the Qualcomm push is based on a presentation the San Diego-based chip giant has been “circulating around Washington” and was reviewed by the WSJ.

Huawei was effectively blacklisted in May 2019 when it was placed on the Commerce Department’s Entity List, requiring U.S. companies to get a license from the Commerce Department to ship certain components to Huawei. That blocked access to popular but proprietary Google apps and services, among other technologies. Further limitations came this May, curbing Huawei’s access to semiconductors by prohibiting global vendors from using U.S.-based manufacturing technology to produce chips for Huawei.

According to the WSJ, Qualcomm’s presentation said federal controls on exporting smartphone chipsets are providing non-U.S. competitors with a market worth up to $8 billion annually, pointing to Taiwan’s MediaTek and South Korea’s Samsung as beneficiaries.

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Qualcomm, a leader in 5G chipsets, said U.S. policy would not hurt Huawei, which could find the components elsewhere, but instead hinder American R&D leadership on 5G, according to the WSJ report. In contrast, a license authorizing Qualcomm to sell chipsets to Huawei, including for 5G smartphones, would generate billions of dollars in sales for Qualcomm that could be used to fund R&D for new technology.

In July, Qualcomm and Huawei reached a settlement and entered into a long-term global patent license agreement. The vendor is expected to pay Qualcomm an estimated $1.8 billion in the fiscal fourth quarter for owed amounts.

Huawei has often been at the center of ongoing tensions between the U.S. and China, with security and technology at the forefront. The U.S. continues to campaign to keep Huawei – which is also a leading telecom equipment vendor - out of next-generation networks abroad citing national security concerns, while imposing sanctions that have worked against the company’s global competitiveness.

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Over the weekend, the Associated Press reported that Huawei is running out of processor chips because of the U.S. sanctions imposed in May and will be forced to stop production of its own Kirin chips next month. The recent restrictions against Huawei meant vendors globally couldn’t use advanced U.S.-based fabrication technology and designs to manufacture semiconductor components for the Chinese tech giant.

Speaking at the China Info 100 conference on August 7, the president of Huawei’s consumer unit Richard Yu categorized the halt on production of Huawei-designed Kirin chips as “a very big loss for us,” according to the report.

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“Unfortunately, in the second round of U.S. sanctions, our chip producers only accepted orders until May 15. Production will close on Sept. 15,” Yu said. “This year may be the last generation of Huawei’s Kirin high-end chips.”

Amid U.S. pressure, Huawei at the end of June overtook Samsung for the first time as the world’s leading smartphone vendor, according to Canalys. Huawei shipped 55.8 million devices in the quarter, down 5%, compared to Samsung at 53.7 million, representing a global 30% decline for the South Korean vendor.

However, the firm noted that U.S. restrictions stifled Huawei’s international business, with shipments outside of mainland China falling a steep 27% in Q2. Its domestic market share, meanwhile, jumped 7% with Huawei selling 72% of smartphones in mainland China during the period.