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China's top chipmaker says protectionism hurts industry

Openness is key to innovation, argues Huawei executive

Huawei Chief Strategy Officer Chu Qing said openness is the key to innovations in his speech at the SEMICON China fair in Shanghai on March 14.

SHANGHAI -- Protectionism will harm the competitiveness of the chip industry and curb innovation, said a senior executive at Huawei Technologies, China's top chip designer and the world's leading smartphone and telecom equipment maker.

"Protectionism is not sustainable," said Chu Qing, Huawei vice president and chief strategy officer, on Wednesday in a keynote speech at the annual SEMICON China fair in Shanghai. "I don't think protectionism will do any good to the chip industry and protective measures could turn out to make an industry less competitive and even lag behind eventually."

SEMICON China is one of the most important industry events given as revenue from China's semiconductor sector is growing at 20% annually amid Beijing's push to build a competitive segment to cut heavy foreign reliance.

Chu said that consolidation within the sector is a natural part of development, even though some countries are wary of foreign takeover bids. "To block a deal is easy ... but openness is key to all innovations," said Chu. He did not comment on specific cases in his remarks, and told the Nikkei Asian Review that he was only sharing his personal views, not Huawei's. 

On Monday, U.S. President Donald Trump blocked a bid for the takeover of Qualcomm, the world's No. 1 mobile chip provider, by Singapore-based rival Broadcom, citing national security concerns. Trump also pointed to the potential threat that Huawei will eventually edge out Qualcomm and Broadcom take the lead in 5G, or the fifth generation of cellular technology, should the acquisition go through.

The U.S. government said the Broadcom deal could curtail American investments in 5G wireless chip technologies -- an enabler of faster data transfer speed and lower latency and a communication foundation for driverless cars, complicated artificial intelligence workloads, virtual and augmented reality video streaming, and remote medical surgeries.

China, too, has faced strong resistance in its foreign shopping sprees especially in the chip sector, given national security implications. Chips are used in every electronic device ranging from mobile gadgets to data center servers. U.S. authorities have killed most chip-related deals with Chinese funds recently.

For Huawei specifically, it faces intense scrutiny from the U.S. This January, American carriers AT&T and Verizon dropped plans to sell Huawei's handsets, while the heads of six major U.S. intelligence agencies including the CIA and the FBI warned its citizens not to use products and services made by the Chinese tech titan for security reasons. Huawei's telecom and networking equipment have also been blocked from use in the world's largest economy.   

But Huawei is still the global No. 3 smartphone maker after Samsung Electronics and Apple, and also the world's largest producer of telecommunication parts. The company's secretive chip arm Hisilicon Technologies is China's biggest chip designer by revenue and a technology frontrunner.

Although Hisilicon mainly makes chips for its parent company, it has always adopted cutting-edge and the most expensive chip production technology also used by Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker, in fabricating chips for Apple. In addition, Hisilicon also builds chips for various connected devices and is a prominent chip supplier for surveillance cameras, smart TVs and setup boxes, according to Bernstein Research.

Huawei's Chu also said the ultimate winner for the coming years will be the company that can manage technologies for 5G and various connected devices. "Apple is the most valuable company on the planet currently as it rides on the smartphone wave over the last decade," said Chu. "But for the next few years, the most valuable company will be someone who dominates 5G and IoT," he said, referring to the internet of things.

Huawei has been pouring money into 5G mobile network research and development for years and is a notable player who owns a wide range of patents in the segment. In February, Huawei's consumer electronics chief Richard Yu vowed to take over Apple in one to two years to become the world's second-largest smartphone brand.

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