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Huawei building chip factory in China to mitigate US sanctions fallout: Report

Huawei is going to build a dedicated factory in Shanghai, where it will build chips without any American technology, reported Financial Times. This marks another move by the Chinese telecommunications equipment giant to ensure business continuity in the face of American sanctions. Huawei has been unable to use American technology since the country placed it on its Entity List in May 2019 citing national security reasons.

The plant will likely be a huge boost for the company since it is reportedly running out of chips to use in its smartphones. It will reportedly be operated by Shanghai IC R&D Center, a chip research company backed by the Shanghai municipal government.

The company will begin by initially experimenting with making low-end 45-nm chips, a technology considered inferior to newer architectures, per FT. Huawei will plan to make more advanced 28nm chips by the end of 2021, which will be used in its smart TVs and internet of things (IoT) devices, several sources told the publication. Huawei will then begin making even more advanced 20nm chips by late 2022, which could be used in the company’s controversial 5G equipment.

New plant won’t help smartphone business: A source told the publication that the new production line will not help Huawei’s smartphone business. Smartphones generally use chipsets produced with more advanced technology. For instance, Huawei’s current flagship phones, the Mate40 series, are built using a 5nm technique. According to a report from two months ago, Huawei  has 8.8 million units of these 5nm “Kirin 9000” chipsets available, which will last only for a few months.

Huawei’s trouble with the US, and around the globe

Chinese tech companies have been facing intense scrutiny all over the world due to suspicions that they work with Chinese military and intelligence. The US had designated Chinese telecom giants Huawei and another Chinese company ZTE as “national security threats”. The two companies, along with their affiliates, were also added to the US Department of Commerce’s “Entity List”, which prohibits them from importing or exporting superior American technology.

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Huawei’s business has been gravely impacted by US’ actions against it. A few weeks ago, the US added Semiconductor Manufacturing International Corporation (SMIC), one of Huawei’s largest chip suppliers, to its blacklist alleging links to the Chinese defense establishment.

Another major impact of the restrictions was that Google had to suspend Huawei’s Android license, meaning Google services such as Gmail and Play Store are no longer available on Huawei smartphones. Huawei has since intensified efforts to build its homegrown Harmony OS, which it hopes to ship on its smartphones from 2021.

Huawei’s 5G tech not welcome

Not just the US, but multiple countries have taken imposed similar restrictions on Huawei, especially in order to prevent the company from deploying 5G infrastructure in their territory. Australia was one of the first countries to ban Huawei from its 5G infrastructure in 2018. Earlier this year, the United Kingdom announced that it would remove Huawei from its 5G networks by 2027. More recently, Sweden banned telecom equipment from Huawei and ZTE.

The US government, meanwhile, is actively encouraging countries to stop using Chinese tech in their telecom networks. It is reportedly offering loans to developing countries as an incentive to steer them clear of hardware made by Huawei and ZTE.

India has been more measured on the subject. Late September, India and Japan announced that they would work together on developing 5G and 5G Plus technologies, with technological support from the US, Australia and Israel. An Indian government official had told Hindustan Times that India’s 5G policy was taking “final shape”.

Currently, both Huawei and ZTE are allowed to participate in 5G trials in India, although the government has reconsidered this decision after the border clashes. Recently, the Ministry of Electronics and Information Technology (MEITY) told Parliament that it had no plans to exclude Chinese companies from 5G infrastructure contracts. However, companies are trying to maintain a distance from Chinese companies on their own. Last month, Airtel was reported to be applying for 5G trials without Chinese vendors like Huawei and ZTE. Similarly, Reliance chairperson and managing director Mukesh Ambani had announced in July that Jio’s 5G technology was built “from scratch” by Reliance employees, without any Chinese tech.

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