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Huawei crackdown

Huawei says US crackdown will create 'challenges' for chip development

Rotating chairman says AI road map on track despite likely $10bn hit to handset revenue

Huawei Rotating Chairman Eric Xu shows of the company's advanced Ascend 910 chip in Shenzhen on Aug. 23. (Photo by Lauly Li)

SHENZHEN/TAIPEI -- The U.S. crackdown on Huawei Technologies may hinder the company's chip development efforts in the future, the Chinese tech giant said on Friday, acknowledging for the first time that it has lost access to the world's two top chip design tool providers.

Rotating Chairman Eric Xu said on Friday that Synopsys and Cadence, both of the U.S., have stopped providing chip design support to Huawei following the Chinese company's inclusion on Washington's so-called Entity List, which restricts its access to American technology.

Huawei can, however, continue designing chips using software it has already obtained from the two U.S. companies, meaning the impact on development is not likely to be immediate.

Xu also estimated the U.S. crackdown will cause Huawei's flagship consumer electronics business to fall about $10 billion short of its revenue goal for this year, though he offered a slightly rosier outlook than previously for the company as a whole.

Huawei was placed on the Entity List in May, but has been granted another 90-day reprieve for existing products until mid-November.

"There are challenges that we need to tackle, and the efficiency could not be as high as in the past, and we have to take on more workloads," Xu said at a press conference in Shenzhen. "But there are always other alternatives. ... There are no challenges that are insurmountable."

Xu's remarks came as Huawei launched its Ascend 910 chip, which the company says is the world's most powerful by computing density. Huawei says this chip is capable of competing against Nvidia's and Google's offerings to provide faster AI-infused solutions for hyper-scale data centers. The chip was first unveiled in October last year as part of Huawei's long-term AI strategy.

Xu added that Washington's ban would not affect Huawei's road map for introducing the next generations of the Ascend series in the coming years. The company also plans to unveil new AI-related products at the upcoming Huawei Connect event next month.

Being cut off from advanced chip design tool services could hit Huawei's in-house chip development program and impede its long-term 5G ambitions, Nikkei Asian Review first reported on May 31. Huawei chip unit HiSilicon Technologies is China's top chip developer, which helps give the smartphone maker the most advanced mobile processors in the wold and a wide range of chips. Huawei's rapid rise in recent years to become the world's second-largest smartphone maker is due partly to its ability to make its own custom chips -- with support from the American chip design tools providers.

Apple, Qualcomm, Samsung, Intel and all the global chip developers rely on chip design tool suppliers such as Synopsys, Cadence and Mentor, a Siemens company, to provide design tool kits to lay out the blueprints of chips. The more complicated and advanced the chip is, the more support and software updates are required from the chip design tools makers. China's own chip design tool service provider Empyrean Software is currently not able to support Huawei's advanced chip development programs, industry experts familiar with the matter said.

The rotating chairman said both the recent addition of Huawei affiliates to the U.S. blacklist and the extension of a 90-day grace period will have "zero impact" on the company. According to Xu, Huawei has become used to being on the U.S. Entity List. "Huawei sees being on the blacklist as a long-term matter now. ... It's not likely that we could be relieved from this anytime soon," Xu said.

Xu also made an updated estimate on the financial impact of Washington's clampdown, saying its flagship consumer electronics business will likely fall short of its full-year revenue goal by about $10 billion -- this is just after Huawei surpassed Apple as the world's second-largest smartphone maker.

For the whole company, Xu predicts revenue will come in just under $30 billion short of the full-year target this year, slightly better than Huawei founder Ren Zhengfei estimated in June. At the time, Ren said the U.S. blacklisting would cause the company to miss its goals by $30 billion this year and next.

Xu's comment came as Washington stepped up the pressure to add 46 Huawei affiliates -- including 11 research institutes -- to the blacklist, aiming to further restrict the company's ability to circumvent the sanctions and slow the company's pace of innovation.

"It will still take time for Huawei to catch up with international market leaders like U.S. chipmaker Nvidia in AI computing," said Arisa Liu, a semiconductor analyst at Taiwan Institute of Economic Research. "But Huawei's AI offensive will never stop as it's a major strategy that the Chinese government hopes will upgrade its industry."

Most advanced data centers of Chinese internet giants Baidu, Tencent and Alibaba Group Holding are still run on U.S. chipmaker Nividia's solutions, Liu said. "As the U.S.-China tension becomes a long-term issue, the whole Chinese tech industry will definitely want to build something locally."

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