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Huawei is everywhere again, G42 as seen from China and more

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Noteworthy Items

Semis and Deep Tech

There seems to be a new tone in Chinese press coverage of TSMC. This article sums it up fairly well “TSMC: Dead Man Walking”. Here is another similar piece. The thesis is that TSMC is having a harder time advancing its process technology, Samsung is catching up, and Chinese fabless companies are finding alternatives. Of course, at another level this about geopolitics and an attempt to play down the significance of TSMC and thus the US restrictions limiting China’s access to TSMC. We do not agree with the factual case presented, but it is worth paying attention to the bigger message, especially in light of Taiwan’s upcoming election.

There is a market for RF chips for Wi-Fi systems. Unlike RF for mobile phones, these are fairly easy to design and get manufactured. It is a decent niche business but not terribly lucrative. In China there are 10 companies making chasing this $20 million market. Case study in overcapacity for China semis.

A case study of RF maker Maxscend. A study on how a company can move up the value chain. Starting with discrete products, Maxscend next bundled those into complete modules. Eventually, they will need to add packaging and acquire other products to further bulk up their modules. This is how the US and EU went from a few dozen RF vendors to five today.

In a similar vein, an overview of China’s Auto semis market. Dozens of companies fighting over a massive market, moving from discrete products to modules, overcoming various technical hurdles to move up the value chain. This segment is likely to see some of the first Chinese vendors to really arrive onto the global scene. Plus, another look at more Chinese MCU companies.

BYD Semis is filing to go public. Again. This is something like their fourth or fifth attempt. This saga is interesting for all its ups and downs. More significantly, the company’s filings tell an interesting story. While BYD Semi is in theory a captive, internal vendor to battery and auto maker BYD, it already generates 40% of its revenue from external customers. This figure was higher last year, but BYD Auto has been doing so well that their purchases surged last year. Very different model than the internal chip divisions we see in the US. Another way in which BYD Semis stands out is that it makes almost all of BYD Auto’s semis, implying that BYD Semi is very capable.

RF Maker Kangxi went public. In 2022, the company generated RMB 43 million in cash from operations, and currently has a market cap of RMB 8.5 billion.

Interesting take on the service provided by China semis companies to their customers. The quick is summary is that many have seen a surge in sales since the US restrictions came down last year, and they were not ready for it, resulting in some disgruntled customers. A solvable problem, but another unintended consequence of domestic substitution.

Hard data on China’s fab construction. Fewer than we thought, but still a lot.

Loongson is probably China’s most advanced CPU maker. They have just launched a new CPU, which looks sortof competitive against Intel’s and AMD’s PC products. They do not have to beat the leaders, showing up with something that is ‘good enough’ will likely go a long way.

Alibaba has reportedly opened an AI cluster based entirely on RISC V based chips. This could have gone in our regular newsletter, but we include it here as an important example of China using RISC V to de-risk its reliance on foreign IP.

Huawei

Huawei has gone from watching silently from the sidelines to a full-blown media campaign. We could easily do an All-Huawei newsletter. A few highlights below.

Huawei has spun off its automotive software unit into a stand-alone company. Huawei seems to have a compelling software stack for ADAS and other in-car systems. It has customers in China and interest from some of the European auto makers as well. The spin-off seems to have two purposes: commercially it allows other automakers to sign up or even invest and reduces the risk of being overly dependent on Huawei which may or may not have plans to make its own cars. The second goal is political, it opens the door to potentially get the unit out from under US sanctions. Caixin provides a deep dive. Also worth noting, the first outside investor in the company is Chang’an Automotive, which is doing well with electric vehicles (EV) and comes with significant political ties. This looks significant.

Huawei has become an important case study for EDA tools in China. There is a lot of speculation as to how they are able to design chips with limits on their access to the US EDA giants. They have sparked a lot of interest in and business for Chinese EDA tool makers.

China Mobile and Huawei announced a 1.2 TB/s fiber link between Beijing and Guangzhou. They claim this is the fastest Internet backbone link in the world.

Huawei received a patent for using diamond substrates for semiconductor manufacturing. We can debate the technical significance and challenges of diamond substrates. More important is the reminder that Huawei is doing a lot of work in the deep technical weeds of semis materials and manufacturing.

There is growing concern in Washington about Huawei’s cloud ambitions. A few months back we linked to a story about Huawei’s big data center investment announced for Saudi Arabia. We have heard from friends recently visiting Saudi how many Huawei employees they stumbled across there. This is highly reminiscent of the time ten years ago when we heard the same stories about Huawei employees spanning the globe as they built up mobile networks. Is Cloud and AI Huawei’s new core business? Or maybe it is autos.

The way in which Huawei has been able to circumvent US restrictions to build its Kirin 901S chip are becoming clearer. Doug O’Laughlin and Dylan Patel also went on Bloomberg’s Odd Lots to share their work on the subject. The summary of which is that there are a lot of loopholes in the restrictions.

Honor, the handset spun off from Huawei, announced it plans to go public. Honor has picked up some of the share Huawei lost, and we are eager to see their financials. We also wonder what they will say about renewed competition from their former parent.

Automotive, Industrial and Macro-Economics

Xiaomi is launching an EV soon, and images of it leaked online recently. Xiaomi is the most Apple-like of China’s electronics companies, at least in the sense that it looks to build complete ecosystems connecting its products. So their entry into autos has been watched closely. And we are sure any design similarities to Tesla are purely coincidental.

EV maker Li Auto’s semi team has 160 employees. This does not sound like enough to build much in the way of automotive semis (at least in comparison to BYD), and sounds like it is mostly focused on autonomy.

Foxconn is reportedly investing $1.5 billion in India in support of Apple manufacturing and other projects.

Software and the Cloud

Alibaba has ported its messaging app DingTalk to Huawei’s Harmony operating system (OS). Huawei has been working on Harmony OS for several years, in a bid to replace US-based Google’s Android. Building an OS is hard work in part because of the need to bring app developers into the fold. For their part, the app developers are reluctant to incur the cost of porting until there is sufficient adoption of the OS to generate a return on the investment. This could play out differently in China. Obviously there are political incentives to sign up to a domestic OS. Also, China is known for the dominance of its Super Apps like WeChat and AliPay. All of which should make it much easier for Huawei to scale Harmony to a sustainable level. So what is most interesting about the latest news is the fact that none of that has happened. The big Internet companies have not leaped on to Harmony yet. Maybe they will, but it is important to remember that Huawei inspires almost as much fear among Chinese companies as it does in US policy circles.

The New York Times profiled UAE company G42, with a focus on its close ties to China’s electronics industry, with Huawei seeming to loom in the background. G42 is run by current and former PRC nationals, and its very rapid rise is reportedly raising concerns among US National Security professionals. G42 is not well covered in China, but is not totally unknown there (and one more for good measure). Not mentioned in the NY Times piece, G42’s first success in the UAE seems to have come about importing SinoPharma’s Covid vaccine, for which it won praises in China and in the UAE.

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For Paid Subscribers below we take a look at some of the unintended consequences of the US restrictions on China semis.