Author|Pai Feishu, Editor|Pai Gongzi
When the P50 mobile phone was delayed, the Huawei Mate 50 mobile phone came with bad news.
Recently, some media broke the news that Huawei will not release the Mate 50 mobile phone this year, which is also the first time that the series of mobile phones may be interrupted since its launch in 2013. Subsequently, although Huawei’s supply chain company said that it received plans for Huawei’s MAte50 series, the Mate series that supports Huawei’s high-end machines still gives people a sense of uncertainty.
You know, when it was not affected by the US chip ban, Huawei’s Mate 30 series mobile phones achieved 12 million shipments in two months after its release, which also made it one of the most successful high-end mobile phones in the world. However, after the passage of time and the suppression, Huawei struggled to move forward under pressure, and “living” became its main goal. Today, it is rumored that the Mate series of mobile phones may become a swan song, which is inevitably embarrassing.
How painful is chip pain?
On May 15, 2020, on the basis of the “Entity List”, the US Department of Commerce continued to upgrade its chip regulations on Huawei, strictly restricting Huawei’s use of US technology, software design and manufacturing semiconductor chips, and Samsung, TSMC, and even SMIC cannot manufacture for Huawei. This time, Huawei failed to repeat the feat of the 2019 HiSilicon spare tire turning positive overnight, and Huawei’s industry chain ecosystem partners revealed: “In response to chip supply cuts, Huawei has no B plan, from the news of contacting Huawei’s senior management, it is temporarily not.” The specific countermeasure should mainly be to seek domestic alternatives. ”
According to Canalys, Huawei’s global mobile phone shipments reached 240 million units in 2019, with an average of 60 million mobile phones shipped every quarter. By the first quarter of 2021, Huawei’s global mobile phone shipments were only 14.9 million units, down 50% year-on-year, falling to sixth in the world, with only 4% of the market share. In terms of chips, Huawei’s HiSilicon smartphone shipments fell 88% year-on-year. According to Omdia, Huawei’s HiSilicon revenue in the first quarter of this year fell by as much as 87% compared with the peak in the second quarter of last year.
Huawei’s mobile phone and chip business slipped from the cloud to the bottom.
In fact, Huawei had already somewhat foreseen this dilemma as early as 2019, so in that year, Huawei released the “1+8+N” all-scenario smart life strategy: “1” refers to mobile phones, “8” includes eight major services of PC, tablet, TV, speaker, glasses, watches, car machine, and headset, and N includes five life scenarios of smart office, smart home, sports and health, audio and video entertainment, and smart travel. Its goal, of course, is to build an ecological chain of personal consumer products to open up more market space and seize the Internet of Things track, while relatively reducing the proportion of mobile phones in their revenue.
Due to the shortage of mobile phones, Huawei was forced to increase its efforts to promote ecological chain integration products. A Huawei store owner said that since October 2020, Huawei has begun to require mobile phones to be equipped with converged products, and this is a mandatory requirement. The owner recalled that at first the ratio was 1:1, with a mobile phone with a fusion product, and then the ratio gradually increased, and more than ten fusion products needed to be imported at the same time to take 6 mobile phones, including desk lamps, body fat scales, backpacks, etc.
On the other hand, at the time of chip shortage, Huawei’s sub-brand Honor is also facing complex situations such as revenue decline or even stagnation caused by insufficient supply of downstream distributors, channel contraction in third- and fourth-tier cities, and accelerated layout of friendly companies. In this situation, Huawei can only choose to give priority to the supply of Huawei mobile phones, and Honor mobile phones have no choice but to become victims of Huawei’s broken arm to survive. On November 17, 2020, Huawei officially sold Honor for 100 billion yuan and no longer held any of its shares, and Honor, founded in 2013, has become an industry giant with annual sales of 70 million mobile phones.
Under this series of operations, Huawei’s terminal sales outside mobile phones achieved rapid growth in 2020, an increase of 65%, which offset part of the impact of mobile phones, and finally achieved the overall growth of the consumer business – revenue of 482.9 billion yuan, a year-on-year increase of 3.3%.
However, in the era of intelligent networking, mobile phones are still the most important entrance to connect all things, and the frequency of use is far from comparable to ecological chain products.
Although Huawei’s consumer business has not regressed, the mobile phone business has inevitably fallen into decline, especially the Mate series of high-end mobile phones have been discontinued, which symbolizes that Huawei’s mobile phone business is no longer sustainable due to chip problems. Once the Huawei mobile phone in the user’s hand has completed its life cycle, how much hope does Huawei have to get the ticket to the era of intelligent networking? This is undoubtedly a pessimistic expectation.
Can Software Services Survive the Sky?
There is no doubt that the chip ban stuck Huawei’s neck, how to crack it?
On May 30, Ren called on the company’s employees to “dare to lead the world in the software field,” which has “greater independence and autonomy,” and the company is looking to grow beyond the hardware business.
Among them, the Hongmeng operating system may become a cloud-piercing arrow for Huawei’s “curve to save the country” and break through the blockade.
Founder Securities analyst Chen Hang believes that the road left to Huawei can only be another stage beyond hardware manufacturing, similar to Microsoft’s Windows and Google’s Android, although not involved in the manufacture of hardware products, but relying on Huawei’s Hongmeng OS, Huawei technology can be ubiquitous, that is, Huawei INSIDE.
The release of Harmony OS 2.0 on June 2 is a key step on Huawei’s path to software. The Harmony system released this time has an additional “super hardware” function than Android, through which it can quickly connect with other Harmony devices and share hardware resources. This makes the Harmony system a full-scenario distributed OS, covering diversified terminals with a memory scale of 128K-8G and above, providing a unified operating system framework, and flexibly combining into an OS that meets the requirements of the device according to different device capabilities and device types, which has been applied to mobile phones, watches, smart screens, PAD and car machines.
Therefore, it can be said that Hongmeng is a system that truly adapts to the current era of 5G and the Internet of Things, which is obviously different from Android in the compatibility mode of continuous patching and upgrading at the application level to achieve the interconnection of all things, at least in the development difficulty and connection efficiency will have obvious advantages.
This can indeed give Huawei the imagination of software services. Taking Apple’s software services business as an example, which includes subscription services such as App Store, Mac App Store, Apple Music, Apple Pay, AppleCare, Apple TV+, and iCloud, the number of users has reached 620 million, and this business generated $15.8 billion in revenue for Apple’s service market in Q1 2021, compared with $12.7 billion in the same period last year.
Another focus of Huawei’s software services is smart cars, Huawei Rotating Chairman Xu Zhijun once revealed; “We are committed to investing in autonomous driving software, with the goal of making cars driverless, and once realized, it will disrupt almost all industries related to automobiles, which is the most disruptive industrial transformation seen in 10 years.” On April 17, before the official release of Harmony OS 2.0, Extreme Fox released the Alpha S and Alpha S Huawei HI versions. This car not only has Huawei’s ADS autonomous driving solution with L4 technical architecture, but also debuts the Huawei Hongmeng OS intelligent cockpit.
From the official guidance price, the Huawei HI solution (Huawei Inside) version is 8-100,000 yuan more expensive on average, which shows that Huawei can get a lot of software revenue from the car, if each car Huawei can get 60,000 yuan of revenue, then 300,000 units is 18 billion yuan, which is definitely a tempting cake.
“Based on the HarmonyOS vehicle system, we have carried out in-depth cooperation with more than 80 software and hardware partners.” On June 18, Wang Jun, President of Huawei’s Intelligent Vehicle Solution BU, said during the 2021 China Automotive Forum that Huawei will firmly follow the path of platform + ecosystem, build a hardware ecosystem and software ecosystem around the three domain operating systems and multi-domain collaboration framework HAS Core, and help car companies build “good cars”.
Moreover, Huawei’s senior management has repeatedly clarified and promised that Huawei will never build cars, and the goal is very clear, that is, to focus all of Huawei’s energy on software services, hoping to use HarmonyOS and HarmonyOS vehicle systems to penetrate as much and deeply into the future intelligent car industry as possible and become Android in this field.
When Huawei’s mobile phone sales are in trouble, the revenue of software services will not fluctuate with the change of hardware sales, and in the future, Huawei can obtain continuous income through deeply customized software licensing and channel commissions. Moreover, in the field of smart home and smart cars, all participants are in the same running line, and there are no mature ecological oligarchs such as Android and iOS. Relying on deep technology accumulation and intelligent hardware ownership, Huawei has a great opportunity to lead, so this has become the best breakthrough for Huawei’s current business growth.
Shifting from hardware to software is a must for Huawei to become the leader of the next era, and it is also a helpless move after Huawei’s mobile phone business is blocked due to chip problems. Although the software business has a vast space, the lack of mobile phones in the era of the Internet of Things is absolutely intolerable to Huawei, so is there still a chance for Huawei mobile phones?
Domestic chips are produced for a period of 3 years
“Due to sanctions restrictions, many products cannot be produced and are seriously out of stock, which is really not the love and expectation of consumers.” In May, Yu Chengdong posted in the circle of friends that Huawei’s mobile phone business was in a difficult situation because of the chip problem.
Yu Chengdong’s “regret” is difficult to turn around in the short term. The industry generally believes that there is no solution to the chip problem in the short term, and can only rely on the easing of trade relations or the technological breakthrough of domestic chip manufacturers, and it will be difficult to overcome it by relying only on Huawei itself.
Of course, Huawei did not stop. On June 2, Hubble Investment, a subsidiary of Huawei, invested in Beijing Keyi Hongyuan Optoelectronic Technology Co., Ltd., accounting for 4.76% of the shares, becoming the seventh largest shareholder. The main business of Keyi Hongyuan is the light source system, one of the three core technologies in the lithography machine.
In fact, in addition to this investment in lithography machines, Huawei Hubble has invested in 32 related companies in the semiconductor field so far, covering EDA, semiconductor materials, RF/analog chips, lithography machines and other important fields. Industry analysts believe that Huawei’s ultimate goal is most likely to help build a complete and purely domestic semiconductor supply chain and achieve true de-beautification to ensure the security of its own chips.
Huawei’s chip dilemma is of course not only Huawei’s own problems, this requires the entire semiconductor industry to work together to overcome, at present, the market has reported that SMIC, Shanghai Microelectronics, etc. have made a lot of breakthroughs in the localization of 28nm chips and equipment. Academician Ni Guangnan said: “In the current domestic chip industry ecology, there are leading enterprises in each subdivision in the card slot research and development, completely covering the entire industrial chain, and the progress of technology is also changing with each passing day, fully equipped with the mass production capacity of 100% domestic chips in 28nm technology nodes. More importantly, Ni Guangnan believes that the maturity of 28nm technology will provide China with a higher-end chip accumulation technology foundation.
So, what is Huawei’s role in this? Ning Nanshan, assistant researcher at the Strategic Research Center of Renmin University, believes that the talents of the two domestic R&D teams of the Chinese Academy of Sciences and Huawei have been coordinated in the past few years, especially Huawei, which is related to its survival, and the possibility of no technical personnel participating in the localization of production lines is zero.
He said that Huawei may use the foundry production line for joint research and development, and the mature and low-difficulty part of the technology is directly handed over to the foundry and equipment manufacturers, while the identified process technology with higher difficulty is jointly completed by Huawei, the foundry and the equipment manufacturer, Huawei and the foundry share intellectual and technical property rights, and the final product is produced by the foundry. “After all, HiSilicon has many years of experience in cooperation with SMIC and TSMC, especially 5nm is TSMC’s first customer, and HiSilicon must also have talents who understand the semiconductor production process.”
On the other hand, support from the national level will also accelerate the solution of Huawei’s chip problems. China has established a large semiconductor national fund to support the development of local semiconductor companies and issued a series of support policies.
However, Huawei’s chip urgency can still not be alleviated in the short term, and most of the current semiconductor advanced process localization time points to 3 years.
However, in the field of electronic consumption such as mobile phones, time means life, and in the field of chips, money and time are difficult to bypass the threshold, and time is not on the side of Huawei mobile phones. Therefore, the rumors of Mate series mobile phones and the lack of cores behind them will undoubtedly have an incalculable negative impact on Huawei’s mobile phone business.
I hope that Huawei, the flag bearer against the wind, can see the dawn of domestic chips.