Huawei Report

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$400M IN PARTS INVENTORY, FOUR MONTH+ SUPPLY

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(more…)Joe Madden, a well-informed analyst, writes, During late 2018, Huawei started ramping up their purchasing of key semiconductors for their 5G base station platform. By May 2019 [Huawei] had inventory equivalent to 100,000 additional base stations using 64T64R MIMO. Yes, that’s a pile of 20 million amplifiers and millions of FPGAs. It’s a commitment of at least $400 million for “extra” inventory, in addition to their immediate production requirements. FPGA’s (Field Programmable Gate Arrays) are designed to replace a circuit board with a single, easily configured chip. They are the right choice for the initial design and any product that’s not being sold in high volume. As product volume goes up, they are usually replaced with a dedicated chip, an “Application specific integrated circuit.” Xilinx and Intel/Altera, both U.S. companies, dominate the top of the market.

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$1.4B NEW SHANGHAI CENTRE FOR 30,000 RESEARCHERS – WITH APARTMENTS

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(more…)📷Looks idyllic “Come work for Huawei and we’ll give an apartment!” New graduates have a terrible time finding housing, especially in Shanghai or Beijing. Ren has decided to compete for the best talent in the world. The apartments going up in the Shanghai Qingpu research park will lure some of the best to Huawei. In China, the company is offering a handful of top PhDs as much as US$300,000. Huawei, Tencent, Alibaba, Baidu and the other Chinese giants are competing for graduates. It is hiring 15,000 this year. Huawei has 15 large research centres around the world, backed by a huge R & D budget. It is the only company in communications that is investing heavily in basic science. Why Shanghai when headquarters are in Shenzen? The company didn’t say, but I’d guess the nightlife is much livelier in Shanghai.

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300,000 5G MATE 20’S SOLD IN FIRST FIVE DAYS

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(more…)Huawei is selling the high end 5G Mate 20 in China for RMB 6199 (US$880.) That’s only about $30 more than the 4G version. Who would want to buy a phone likely to be obsolete in a year or two to save $30? The first delivery isn’t until August 16. Over 1 million will be sold by the end of August in China alone. The Mate 20 is a high end, 7.2″ phone that produces extraordinary pictures. (Specs below) Huawei is using its own Kirin 980 + Balong 5000 chips for 5G and is also producing some of the radio frequency components. That brings down the difference in the bill of materials cost. I would guess Huawei only spends about $30 more in parts for the 5G. This isn’t the cheapest 5G phone in China. Oppo is priced at RMB 4,000 yuan (US$580.) ZTE’s Axon10 Pro 5G version is priced at RMB 4,999 and is already delivering. The only thing likely to hold back sales of the Mate 20 are the rumours that the P30 will have a breakthrough camera with a super-large sensor.

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U.S. WAR ON HUAWEI MAY KILL $2B FINISAR MERGER

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(more…)China’s State Administration for Market Regulation is holding up the takeover by II-VI of rival component maker Finisar. There are already too few companies making high-end components. A good argument can be made to block the deal on competition grounds. Finisar makes some of the most advanced optical components. Huawei produces many of its own optics and can work around the U.S. blockade. It will continue buying components from the U.S. if permitted and wants to always have that option. China is such a large part of the global market for electronics that it can effectively block any merger. The institutional investors that own most of Finisar will suffer a loss of several hundred million if the deal doesn’t go through.

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2,100,000 HUAWEI 5G BASE STATIONS IN 2019 & 2020

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Ren Zhengfei says Huawei in 2019 will produce, “600,000 5G base stations, which will grow to around 1.5 million in 2020.” That’s an enormous number. The U.S. in total has under 400,000 bases.

I’ve been raising my estimates for 5G and I think I am still too low. China alone may do more than 200,000 radios in 2019 and 600,000-800,000 in 2020. China won’t stop until most of the two million cells are upgraded.

Korea will do 100,000 cells this year and cover 90%+ of the country. The country just passed 2 million 5G subscribers and is adding 500,000 per month. LG+ is using Huawei radios while SK & KT are using Samsung. Preliminary data is that all three networks are working pretty well. There is little performance difference apparent between the Huawei and the Samsung gear.

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HISILICON PRODUCING 30%+ OF HUAWEI’S RADIO FREQUENCY COMPONENTS

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(more…)📷Mate 20 teardown Radio frequency chips are the most important component Huawei needs in which American companies are far ahead. 5G phones have to support dozens of frequency bands at a very high speed and great precision. Only the very best chip designers can deliver what’s needed in a very small module. It requires special materials and state of the art processing. “Huawei is producing 30% of their RF components,” Qorvo CEO Robert Bruggeworth told investors.

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$17B IN 2019 RESEARCH, UP >10%

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(more…)📷 Huawei is having a rough year, with sales only up 23% to US$58 billion. Phone sales were only 118 million units, up a mere 24% in a declining market. Net profit was only about $5 billion. Chairman Liang Hua carefully did not mention the threat to Huawei’s survival more than five times. He did, however, show pictures of the bullet-riddled plane, symbolizing what Huawei has to face. Huawei sales were less than Google ($75 billion) or Microsoft ($64 billion.) Apple, Amazon, and AT&T remain larger. The combined sales of Alibaba and Tencent (~$55 billion) or Facebook and Disney (~$59) are just about as large as Huawei’s revenue. Kidding aside, Huawei is doing fine.

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TRUMP CALLS INTEL, MICRON, GOOGLE CEOS “LYING HYPOCRITES” (OPINION)

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(more…)Intel and Micron busted Trump’s Huawei boycott by finding loopholes and resumed shipping to Huawei. Google very publicly called Trump’s demand they block Huawei from Google apps a major national security mistake. Trump summoned to the White House Sundar Pichai of Google, Chuck Robbins, of Cisco, Robert Swan of Intel, Sanjay Mehrotra of Micron, Stephen Milligan of Western Digital Corporation, Steven Mollenkopf of Qualcomm, and Hock Tan of Broadcom. “The CEOs expressed strong support of the president’s policies, including national security restrictions on United States telecom equipment purchases and sales to Huawei,” the White House said. Washington is a city of lies, so perhaps that is what they told the President. Alternately, the CEOs might have been lying when (most of) them promised support for China.

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A MOBILE PHONE WITH AN ALL-GLASS FRAME?

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Sina.com has a picture that may be a future Huawei phone with no metal in the frame.

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Huawei was the innovator with two and then three cameras, with software combining them for great pictures. Apple and everyone else are still catching up.

With a $15B research budget there will be a lot more coming.

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HUAWEI BUILDING A MAP LIKE APPLE & GOOGLE

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(more…)High precision maps are a huge strategic advantage, consulted every day by hundreds of millions. Caixin speculates this is the first step into producing an autonomous car. There’s a more obvious path to profit using the data on the web and selling map data. Uber paid Google US$68 million for map data. The quality of the information in Google’s Waze astounds me. It warns us of an obstacle coming up on the highway and offers alternate routes when it detects congestion. We almost never get lost anymore. Building a map of that quality costs hundreds of millions. Huawei is now facing the Law of Large Numbers. It’s so big in telecom network gear there’s almost no way to grow. It looks to become #1 in mobile phones. It needs to find new lines of business to grow.

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$300-$420 MATE 20 PRO A GREAT BUY

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“It’s pretty badass,” Andrew Hoyle says in his CNET review. “The Huawei Mate 20 Pro’s impressive list of features puts it unquestionably among the top phones of the year.” (emphasis added.) In particular, the triple camera is excellent.

It recently sold at prices from $700-$1,000. Telefonica/O2 in the U.K. is now selling the phone for an implicit price of well under $400.For £20.00, you get unlimited voice and messages – and the phone.

The total, including an upfront £99.00, is £579. (US$721.) When you put in any sensible valuation for the service, the effective price of the phone is half what it has recently cost