AI chip demand forces Huawei to slow smartphone production -sources
Send a link to a friend
[February 05, 2024] By
Fanny Potkin and Julie Zhu
SINGAPORE/HONG KONG (Reuters) - Soaring appetite for Huawei's artificial
intelligence (AI) chips coupled with manufacturing constraints has
forced the Chinese tech giant to prioritize AI and slow production for
its premium Mate 60 phones, people familiar with the matter said.
Huawei uses one facility producing both its Ascend AI chips and the
Kirin chips that power its rival to Apple's iPhone, three people said,
two of whom said output has been hamstrung by a low yield rate - a proxy
for production quality.
But a global race for AI functionality amid a Sino-U.S. technological
standoff has left Huawei second-placing its handsets just as the firm
tops Chinese smartphone sales for the first time in more than three
years.
Huawei declined to comment.
The situation offers a rare glimpse of Huawei's challenges as it works
to rebuild since U.S. sanctions in 2019 cut access to advanced
chipmaking tools on national security grounds and crippled its
smartphone unit. Huawei denies it is a security risk.
It also illustrates the impact of U.S. restrictions on sales of AI
processing chips to China, a market that was 90% controlled by U.S.
giant Nvidia before the latest curbs in October pushed Chinese customers
to domestic alternatives.
![](http://archives.lincolndailynews.com/2024/Feb/05/images/ads/current/crossroadsantique_lda_010924.png)
The government has launched an initiative to improve China's position in
computing power. That has spurred local authorities to announce data
centre projects while bolstering public and private demand for Huawei's
Ascend series in particular, according to two of the people and public
tenders.
The Ascend 910B is widely considered the most competitive non-Nvidia AI
chip available in China.
Huawei has prioritized production of Ascend chips over Kirin chips and
so has slowed manufacturing for Mate 60 smartphones, the people said,
without disclosing when the arrangement began.
The firm is also working to improve its yield rate - the number of
usable chips per wafer - so is hoping this production arrangement is
short term, the people said, declining to be identified as they were not
authorized to speak with media.
[to top of second column] |
![](../images/020524PIX/busine61.jpg)
People walk past a Huawei store with advertisements for the Mate 60
series smartphones, at a shopping mall in Beijing, China, Aug. 30,
2023. REUTERS/Yelin Mo/File Photo
![](http://archives.lincolndailynews.com/2024/Feb/05/images/ads/current/businessdirectory_dailycover_2023.png)
LOW KEY
Huawei has been low-key on its chip manufacturing capability and
ambition, and there is little public information on its progress or
how it has managed to produce advanced chips.
Its advancements became apparent after it surprised market watchers
with an unflagged August launch of the Mate 60 series during U.S.
Commerce Secretary Gina Raimondo's visit to China.
Online tear-downs found the phones to possess a Chinese-made chip
capable of fifth-generation (5G) telecommunication speeds. Analysts
said Huawei may have been able to achieve this together with
know-how from China's largest contract chipmaker, SMIC, by tweaking
deep ultraviolet lithography machines.
Such a process is more laborious, expensive and likely less
productive than using the more advanced extreme ultraviolet machines
that the United States has prevented third countries from selling to
China, analysts said.
Mate 60 handsets have been consistently out of stock, with would-be
buyers complaining online of month-long waiting times for pre-orders
to be fulfilled.
Even so, the series was largely responsible for Huawei regaining its
status as China's top smartphone seller in the first two weeks of
2024, said data provider Counterpoint - the first time since the end
of 2020.
Other Huawei products affected by the production bottleneck include
Ascend-equipped computing unit MDC 810, which powers advanced driver
assistance systems, two other sources said.
Chinese automakers had to delay delivery of flagship models due to
production issues with the MDC 810, Reuters reported last week.
(Reporting by Fanny Potkin in Singapore and Julie Zhu in Hong Kong;
Additional reporting by Zhang Yan, Eduardo Baptista and David Kirton;
Editing by Brenda Goh and Christopher Cushing)
[© 2024 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
![](http://archives.lincolndailynews.com/2024/Feb/05/images/ads/current/charrons_bch_2022.png) |