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[core point of view] in September, TSMC will cut off the supply of SIA and apply to the United States for the inclusion of mobile phone chips as a standard. Can Huawei be saved?
Jul 29,2020 14:16CST
translation
The content below was translated by Tencent automatically for reference.

SMM: the United States imposed a stricter export control ban on Huawei on May 15-chipmakers using US technology or equipment must obtain a special license issued by the US government, otherwise it is prohibited from supplying chip products to Huawei, with a 120-day buffer period. As Huawei's most important contract manufacturing partner, the ban bears the brunt of TSMC's impact, and TSMC's attitude to the US ban has also attracted a lot of attention.

It had been revealed that Huawei had urgently placed a large order worth about $700m (4.9 billion yuan) with TSMC and rushed to try to ship before the ban came into effect in mid-September, giving the industry the illusion that TSMC did not want to lose Huawei as a big customer. Will strive to supply Huawei through a variety of ways.

At the legal meeting on the 16th of this month, TSMC finally officially stated that it complied with US sanctions and had stopped accepting orders from Huawei since mid-May and would terminate delivery to Huawei on September 14. In addition, TSMC will not supply Huawei through other third parties, such as shipping to OSAT, and has not applied for a license from the US government, according to the spokesman.

It is reported that on May 15, TSMC stopped receiving new orders from Hayes, and the last batch of chips were put into production in mid-June, and shipments will be completed by about mid-August. Previously, the production capacity of Hayes 5nm chips in TSMC was nearly 30, 000 pieces per month, but now the production capacity has been eaten by Apple, AMD and Qualcomm, while the production capacity of 7nm and 12nm has been undertaken by Apple, AMD, Nvidia, MediaTek and Cyrins.

Although TSMC stressed that it would abide by the US sanctions, at this legal conference, TSMC, together with CEO Liu Deyin and Wei Zhe Jia, revealed a message that current US regulations do not prohibit standard product (standard product) or general product (general product) from shipping to Huawei, so they believe that Huawei's smartphone business is likely to develop a strategy by purchasing general products.

According to the semiconductor supply chain, according to the newly revised export control regulations of the US Department of Commerce's Bureau of Industry and Security, all factories that use relevant US technology and equipment (including test equipment) need to obtain permission from the US government to produce chips designed by Huawei; in addition, integrated circuit design software that uses US technology is also required to obtain permission from the US government when it is provided to Huawei. This means that 5G chips sold by other IC manufacturers to all mobile phone manufacturers as standard products are not subject to the new rules. To this end, Taiwan media reported that TSMC is striving through the US semiconductor industry association (SIA) to include mobile phones other than 5G base station chips and AI artificial intelligence chips in the range of standard products.

Since the sanctions of May 15, the United States has provided a 120-day buffer period for the implementation of the provisions, of which the first 60 days are the interpretation period for proposing laws and regulations, and the key point of this interpretation period is July 14. If suppliers want to continue to cooperate with Huawei, they must apply for permission from the United States.

Risto Puhakka, president of semiconductor market analyst VLSI Research, said that the application process for US export control licenses is onerous, but so far, no licenses have been rejected. At present, the government is in the stage of information collection, and equipment manufacturers say they are adjusting to the new rules. The overall feeling is' very troublesome'. "

According to reports, as to whether the US side will include mobile phone chips in the standard products, 11 units and enterprises, including SIA and Hayes, have put forward their opinions on the deadline for their responses on July 15, mainly striving to include mobile phone chips and other standard products. At the same time, the relevant units also see that the US government is mainly cracking down on the development of Huawei 5G, hoping not to touch the sensitive issue of the US Department of Commerce on 5G base station chips, and strive to relax the inclusion of chips not directly related to 5G base stations, such as mobile phones and AI artificial intelligence, in the category of standard products.

On the one hand, SIA and Hayes applied to the US Department of Commerce to include mobile phone chips as standard products, and hoped to resume the production of mobile phone chips in TSMC to supply Huawei; on the other hand, SIA hopes to include mobile phone chips from TSMC's big customers Qualcomm and MediaTek as standard products to supply Huawei.

However, among the 11 units and enterprises that submitted their responses, TSMC was not included. Industry chain sources said that TSMC will wait for the US Department of Commerce to make a final ruling before making any action. TSMC will not comment on who will replace the follow-up market and products, as well as customers' order plans for next year.

If things don't change, Huawei will feel the impact of TSMC's shutdown within a year. Industry experts point out that it takes 12 to 18 months to develop a chip, so the smartphone chip that will be on the market by early 2021 is already in production, while Huawei's next generation will be in trouble. According to sources, due to the low possibility of obtaining a license from the US government, Huawei may turn to purchasing 5G chips from MediaTek and Qualcomm, of which the 5G mobile phone chips purchased from MediaTek will be bound to 100 million next year. Qualcomm also buys a lot.

According to previous reports from Ji Wei.com, the purchase of MediaTek chips for Huawei's new mobile phones released this year is indeed much higher than in the past. A number of phones, including Huawei's ZG5, Changxiang 20 Pro and Glory 30 Youth Edition, have adopted MediaTek's Tianji 800 chips. At the end of June, MediaTek also added a lot of orders to TSMC because of prosperous shipments of 5G chips.

Although the United States allows chip makers to supply standard products to Huawei, Huawei's mobile phone business still has a way out, but the base station core chips needed for Huawei's 5G business will be in danger of running out of stock.

TSMC, which lost Huawei as a big customer, does not look as frustrated as people think. TSMC's revenue grew by 28.9% in the second quarter, followed by large orders from AMD, Intel's 7nm and 6nm. TSMC also forecasts that business growth is expected to reach 20% this year. Benefiting from Intel's "transfer order", TSMC's market capitalization continued to soar. As of the close of US stocks on Monday, TSMC's market capitalization exceeded 430 billion US dollars, twice that of Intel, making it the 10th largest company in the world by market capitalization.

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