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China tech

China's Oppo steps up chip ambition as US ban hits Huawei

No. 2 Chinese handset maker snaps up top talent from key supplier MediaTek

China's Oppo is looking to make further inroads overseas as competition from Huawei squeezes it at home. (Photo by Shinya Sawai)

TAIPEI -- The U.S. crackdown on China's Huawei Technologies is spurring its biggest domestic rival to build up its own chipmaking capabilities, including by snapping up top engineering talent from its own suppliers.

Oppo, China's second-largest smartphone maker and fifth in the world, began stepping up efforts to design its own mobile chips last year, when the U.S. started clamping down on flagship Chinese tech companies like Huawei, sources familiar with the matter told the Nikkei Asian Review.

Designing its own custom chips could help the company reduce its reliance on U.S. suppliers, as well as compete in overseas markets where Huawei is currently struggling, analysts say. But the effort will not be cheap, and could take years to bear fruit, according to industry insiders.

As part of its more aggressive chip strategy, Oppo has hired several top executives from its key chip supplier MediaTek, as well as many engineers from UNISOC, China's second-largest mobile chip developer, to create an experienced chip team in Shanghai, sources said. Taiwan-based MediaTek is the world's second-largest mobile chip developer after Qualcomm of the U.S.

Recent hires include Jeffery Ju, MediaTek's former co-chief operating officer and a former executive with Chinese smartphone maker Xiaomi, who was already working with Oppo as a consultant. Another rising execeutive involved in MediaTek's 5G smartphone chip development will also join Oppo in a month or two, sources familiar with the matter told Nikkei. The smartphone maker has also reached out to talent Qualcomm, as well as Huawei's own chip unit HiSilicon, they said.

Hiring industry veterans with decades of development experience could help Oppo to accelerate its chip ambitions, sources said.

"Oppo has been aggressively recruiting chip talent since last year as they realized that owning the chip design capability will give it more control over its supply chain," said a source with direct knowledge. "Developing chips, however, could mean burning a lot of money, and even if they have hired a group of experienced professionals, such efforts take years to mature."

Oppo told Nikkei that it "already has chip-related capability" and that "any R&D investment is to strengthen its product competitiveness and user experience," but the company did not respond directly to questions about its recent hires. 

MediaTek declined to comment, and Ju could not be reached for comment.

Huawei set up its own in-house chip design unit, HiSilicon, more than 10 years ago and it has since become China's biggest chip developer. Oppo, by contrast, does not yet have a competitive chip design team and relies heavily on U.S. suppliers for the mobile processor chips and 5G modems used in its smartphones. The latest entry in the company's flagship Find X2 series, released in March, uses Qualcomm's Snapdragon 5G mobile chips, while its midrange Reno series released early this year uses MediaTek's new 5G mobile platform.

Xiaomi, another Oppo rival and the world's No. 4 smartphone maker, formed a chip unit in 2014, but it has not introduced a second generation of its own mobile chip design since the first one in 2017. Currently Xiaomi still mostly relies on Qualcomm and Mediatek for smartphone chips.

Oppo's efforts in in-house chip development are part of a larger "de-Americanization" campaign Chinese companies undertook as tensions between Washington and Beijing escalated. But having its own chips could also give it an edge overseas -- an increasingly important market for Oppo as Huawei continues to gain ground at home.

In Europe, Oppo's first-quarter shipments grew more than 1,000%, according to IDC, despite its global shipments falling 1.2% on the year to 22.7 million units. The company has also deepened its collaboration with several European operators such as Vodafone, Orange and Telefonica, a move that could help it expand its sales presence in the region.

Joey Yen, a tech analyst with IDC, said many deep-pocketed electronics makers hope to "customize their own chips to really differentiate themselves from competitors, and in the long-term could generate better returns and leadership in the industry." Standard smartphone chip designs are readily available and cheaper than custom-built ones, but using off-the-shelf chips means "the handsets you develop could be similar to other industry rivals, especially in the competitive and declining smartphone market," the analyst said.

"The tech tensions and the Huawei crackdown will definitely affect the overall smartphone market demand and supply, and may change the competition landscape," Yen added. "Huawei will continue to survive at least within China, while its Chinese peers Oppo, Vivo and Xiaomi will utilize this opportunity to expand globally."

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