Huawei’s Advances in Chips, Patents Threatens Former Ally Qualcomm
Qualcomm’s China Tech Day conference in January in Beijing represented a who’s who of China’s mobile industry. Top executives from the country’s biggest handset makers showed up. But one Chinese smartphone giant, Huawei, was notably absent.
Huawei, the world’s third-largest smartphone maker behind Apple and Samsung, used to be a major Qualcomm customer. But over the past seven years, it has gradually turned into a competitor by developing its own mobile chips and accumulating more intellectual property related to new wireless technology. That shift now poses a threat to both Qualcomm’s chip sales and, increasingly, to its lucrative patent royalties.
“We view Qualcomm as our No. 1 competitor,” said a manager at HiSilicon, Huawei’s little-known but fast-growing semiconductor subsidiary. HiSilicon, whose chips power phones, telecom base stations and surveillance cameras, is now China’s largest chip developer with revenue of $5.6 billion last year, according to an estimate by Sanford C. Bernstein. HiSilicon’s revenue is still far below Qualcomm’s, which stood at $22.3 billion last fiscal year.
A Qualcomm spokeswoman declined to comment on Huawei or HiSilicon.
HiSilicon doesn’t sell its mobile chips to other, non-Huawei companies. But its growth is still problematic for Qualcomm. Over the past five years, Huawei phones powered by HiSilicon have increased their global market share, often at the expense of other Android phones powered by Qualcomm. Two-thirds of Huawei phones shipped last year came with HiSilicon chips, up sharply from about a quarter in 2014, according to Counterpoint Research. Analysts say this represents an opportunity loss for Qualcomm, which would be cashing in on Huawei’s growth had it not been for the Chinese company’s shift toward homegrown chips. Huawei’s consumer electronics revenue, mainly from smartphone sales, rose 32% last year to roughly $38 billion.
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