US sanctions Huawei fills the warehouse with processor and memory

US sanctions

Due to new US sanctions that cut Huawei off from major suppliers, the company has carefully stocked up on AMD, Intel and Xilinx chips to keep the business running. Huawei has also recently bought significantly more than is needed at DRAM and NAND - we are talking about 50 percent.

AMD and Intel without special release

According to Nikkei Asian Review, referring to several sources from the company, Huawei had already started to purchase and stock chips from Intel and Xilinx in particular at the end of 2018 beyond the actual requirements. Last week, Huawei disclosed that investments for chips from external partners in 2019 amounted to approximately 21.2 billion euros, 73 percent above the previous year. Since May 2019, Huawei has been on the US entity list and may only receive goods from US suppliers after individual release by the US government.

TSMC loses second largest customer after Apple

Huawei needs the products from Intel and Xilinx for the network and cloud business. Huawei made more than 34 percent of its sales last year with the network division responsible for mobile expansion with 5G, LTE and other technologies. From Xilinx, Huawei obtains customizable Fpgas for base stations that, according to a Huawei executive, are difficult to replace by other manufacturers and not their own Hisilicon division. Because Fpgas from Xilinx are also used by the US military, their production will remain with TSMC, but will be brought to the USA. However, in view of current US sanctions, access to goods produced by TSMC will hardly be possible from September anyway. The second largest customer is lost to the chip manufacturer.

Server Cpus purchased without support from third parties

While the enterprise-class cloud business accounts for just over 10 percent of Huawei’s sales, it has become an important pillar over the past few years. For its own servers, Huawei relies on Intel, which is why there were tons of Cpus in stock. To a lesser extent, Huawei obtains chips from AMD. Since Huawei is on the entity list, Huawei can no longer purchase processors from AMD or Intel without special release. This is said to have led Huawei to purchase the goods through local intermediaries or to ask suppliers of other components to purchase the goods and resell them. This in turn results in higher prices and in the fact that Huawei has to do without support directly from the manufacturer and individual adjustments.

Storage purchased 50 percent over demand

At DRAM and NAND, camps are being set up for the time of war, one of the anonymous sources said. Huawei is stocking up with 50 percent more goods from Samsung, SK Hynix, Micron and Kioxia than is actually needed. It was reported from South Korea on Monday that Huawei now requires assurances from Samsung and SK Hynix that storage can be delivered to China in the long term.

Huawei wants to make itself independent of the US

With its own products from the development of Hisilicon, including the Kungpeng ARM CPU or the AI processors of the Ascend series, Huawei wants to make itself independent of US providers. In the smartphone, the Kirin Socs have already succeeded. However, with the most recently extended restrictions to companies outside the United States that prohibit companies from supplying to Huawei if hardware or software developed during production in the United States is used, as is the case with TSMC, the USA have taken away Huawei’s last weapons of defense. Given the technical backlog, Chinese chip production at SMIC (Semiconductor Manufacturing International Corporation) is not yet possible. For Huawei, it is now about survival, as the analyst summit recently said.