Huawei strikes European chip tie-up as fears rise over US curbs

Linda J. Dodson

TAIPEI — Huawei Technologies is working with French-Italian chipmaker STMicroelectronics to co-design mobile and automotive-related chips as it seeks to shield itself from Washington’s possible tightening of export restrictions on the Chinese company, two sources familiar with the matter told the Nikkei Asian Review.

The new collaboration with STMicro, its longtime sensor chip supplier, is also aimed at accelerating Huawei’s autonomous driving development, the sources said.

The joint chip development began as early as last year but has not yet been publicly announced by either. It comes as Huawei braces for tighter U.S. restrictions that could include requiring key chip manufacturers, such as Taiwan Semiconductor Manufacturing Co., to apply for licenses if using U.S. equipment to build chips for Huawei.

Partnering with STMicro on some advanced chips, rather than designing them mainly in-house and ordering their production directly from contract chipmakers, could help shield Huawei from a U.S. crackdown, the sources explained. The collaboration also enables Huawei to secure access to the latest software needed for developing advanced chips. This software is mainly provided by two U.S. companies, Synopsys and Cadence Design Systems, and Huawei rotating Chairman Eric Xu admitted last summer that his company could not get the latest support from these providers because of the trade blacklist.

“Such chip joint-development would give Huawei more flexibility to help itself if the U.S. later presses the nuclear option to block Huawei’s key chip contract manufacturers from producing chips for it unless they can obtain licenses. No one knows what the new export control regulations will be and if these efforts will work, but from Huawei’s point of view, it needs to try to secure more sources of possibilities for those crucial chips,” one of the people familiar with the plan said. “Forging a close tie with STMicro is also a great opportunity for Huawei to hasten [its effort to] build automotive chips, a relatively new attempt in Huawei’s product road maps.”

Apart from possible insurance against any U.S. moves, the collaboration with STMicro is also in line with the Chinese company’s key corporate strategy of expanding its development in connected cars. The company is making a big push in autonomous driving to beat its foreign and domestic rivals, Nikkei reported earlier.

Partnering with STMicro, a leading automotive semiconductor provider to Tesla and BMW, could catapult Huawei into the top tier of players in autonomous driving, the next key battleground for tech companies, sources said.

Among the first joint development projects is mobile-related chips for Huawei’s Honor line of smartphones, one of the people briefed on the matter said. The budget Honor brand is a sales booster for Huawei, shipping 64 million units last year, out of the company’s total 240 million units.

STMicro declined to comment, while Huawei did not comment beyond earlier public remarks by Xu warning of widespread disruption if further restrictions are put in place. Xu also said his company could buy chips from Samsung Electronics and many others if its supplies from TSMC were threatened. 

Trump administration officials are widely expected to further tighten export controls on Huawei, although the details of any new restrictions are yet to be finalized and the president would have to sign off on them.

In a broader move, the U.S. Commerce Department on Monday announced stricter controls on exports of American technologies to China, Russia and Venezuela to prevent their use in military applications. The new rules expand military end-use and end-user controls to cover items such as chip equipment, sensors and other technologies. They also remove a license exception for exports to civilian end-users in countries of national security concern, though it is not yet clear what if any impact this will have on trading activities with Huawei.

The Commerce Department’s Bureau of Industry and Security is expected to release more details on the new rules on Tuesday. 

As for Huawei, its chip arm, Hisilicon, is one of the world’s top chip developers and China’s No. 1 chip designer, designing mobile and networking gear processor chips, as well as modem chips for Huawei’s own use. It is also the world’s biggest surveillance camera chip developer and a leading TV chip provider. But Hisilicon currently relies on TSMC — whose cutting-edge chip-production plants also churn out Apple iPhone core processor chips — to produce many of its advanced chips.

STMicro, one the other hand, specializes in sensor chips, such as gyroscopes, accelerometers, motion, optical and image sensors. It is also a leading automotive chip provider, alongside Infineon of Germany, NXP of the Netherlands, and Renesas Electronics of Japan. But STMicro is far behind Huawei in terms of mobile chip development prowess. The Geneva-based company has faded away in that field since its joint-venture, ST-Ericsson, which focused on mobile application processors, ceased operations in 2013.

STMicro has its own chipmaking plants in France, Italy and Singapore, but it also outsources chip orders to semiconductor manufacturers like TSMC and others.

STMicro CEO Jean-Marc Chery said on April 22 that he believes his company would not be impacted by tighter restrictions on Huawei, as STMicro specializes in components that do not require the most advanced chip production technologies, and thus are not likely to fall under U.S. export control regulations. He added, however, that “I cannot forecast … what will be the overall impact, if such a measure occurs.”

Huawei is one of STMicro’s top 10 customers.

Harry Clark, chair of Orrick’s International Trade & Compliance Group and an expert in trade law, told Nikkei that the most recent indications are that there will be changes to U.S. export controls designed to expand restraints on the supply of non-U.S. made items to designated Huawei companies. It remains unclear, however, when such changes might come.

Clark explained that if the controls are tightened, a chip manufacturer could be found in violation of U.S. law if it sells chips to a non-U.S. intermediary who then sells them on to Huawei, assuming the manufacturer had reason to believe the chips were destined for the Chinese company. The intermediary in that case could also be found in violation, though the details of any potential rule changes are not yet known. 

“The U.S. government has demonstrated an ability effectively to investigate non-U.S. producers and penalize them when it finds that they have contravened U.S. export controls,” Clark said.

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