Huawei Could Stop Making Smartphones, In The Worst Case Scenario: Report

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A report from Tianfeng International analyst Ming-Chi Kuo has indicated that Huawei could stop making smartphones in a reasonable worst-case scenario. As reported by CN Tech Post Huawei will be negatively effected after September 15 but the extent is still unclear.

After September 15 Huawei will no longer have access US-developed technology in fresh sanctions. The US Department of Commerce also added Huawei's 38 subsidiaries in 21 countries onto its "entity list".

This will restrict Huawei's access to technology such as microprocessor chips. MediaTek has recently applied for permission to start supplying Huawei, however.

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The Taiwanese manufacturer may be able to alleviate some of the burden on Huawei if their application is approved. However, in any case, when these sanctions come into place on September 15 they will have a negative impact on the company and its ability to operate.

Huawei could stop making smartphones

Ming-Chi Kuo's report believes that the best-case scenario for Huawei is simply a significant market share reduction. However, in the worst case the company may cease to manufacture smartphones. In this case, the shares of Apple, OPPO, Vivo, and Xiaomi would likely increase to fill the void.

Huawei has higher requirements for the camera, HDI, storage and 5G chip parts specifications. This also means an increased unit price compared to competitors.

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Therefore, if Huawei's competitiveness in the smartphone market declines then so will the innovation in technology. Without Huawei, Kuo argues that technological upgrading of the camera, storage, 5G chips will decrease.

This could, in turn, have the knock-on effect of cut-prices in 2021. This is because as smartphone manufactures are unable to create new advancements their only edge will be in cutting prices.

MediaTek expected to become Huawei's main supplier

As mentioned, MediaTek has put in an application to supply Huawei after September 15. Previously, MediaTek supplying Huawei would not have been a problem as the ban did not affect third party suppliers. This was in the case of supplying standard products, meaning Huawei Kirin chips were still blocked.

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Reports suggest that Huawei may have ordered 120 million chips from MediaTek. Supposedly, seven of the companies mobile phones released this year have used MediaTek chips.

Under these new restrictions, MediaTek has to submit an application to supply Huawei after September 15. As of yet, there is no indication whether this will be successful or not.

The ability for Huawei to establish supply networks could be central to its continued operation in the smartphone market. If this becomes extremely difficult then perhaps Kuo's worst-case scenario prediction of the company pulling out could come true.

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