A U.S. ban on equipment sales crushed China’s Huawei Technologies’ consumer electronics sector, but the company is planning a comeback by the end of the year by entering the 5G smartphone market.

Three independent technology research companies that monitor the Chinese smartphone market told Reuters that Huawei should be able to obtain 5G chips domestically using its own advancements in semiconductor design tools and chip production from Semiconductor Manufacturing International Co. (SMIC).

The companies spoke on the condition of anonymity due to confidentiality agreements with clients, citing industry sources, including Huawei suppliers. Huawei opted against commenting. An inquiry for comment was not answered by SMIC.

The company, which for almost three years said it was in “survival” mode, would triumph if it were to enter the 5G phone market again. Huawei’s consumer business revenue peaked in 2020 at 483 billion yuan ($67 billion) before falling by over 50% the following year.

Until waves of U.S. limitations starting in 2019 cut off its access to chipmaking tools necessary for building its most cutting-edge models, the Shenzhen-based tech behemoth competed with Apple and Samsung to be the largest handset manufacturer in the world.

Governments in the U.S. and Europe have branded Huawei a security danger, a claim the company disputes. Since then, Huawei has only released a small number of 5G devices using stock chips.

In the first quarter of last year, according to consultancy Canalys, Huawei increased its market share in China to 10% despite continuing to sell last-generation 4G smartphones, which caused it to fall from most rankings globally.

5G Forecasts

With an estimated yield rate of usable chips below 50%, one of the research firms predicted that Huawei would employ SMIC’s N+1 manufacturing method, limiting 5G shipments to between 2 million and 4 million devices. Unable to provide more information, a second company predicted shipments may top 10 million devices.

Before selling its Honour division, which contributed roughly a fifth of shipments that year, Huawei shipped 240.6 million smartphones globally in 2019, according to Canalys, its peak year.

This month, the government-sponsored China Securities Journal claimed that Huawei has increased its 2023 mobile shipment target from 30 million to 40 million units without making any mention of a comeback for 5G phones.

The three research firms added that they based their predictions on information they had obtained through checks with contacts in Huawei’s supply chain and recent company announcements. Huawei could produce 5G versions of flagship models like the iPhone rival P60 this year, with new launches likely in early 2024.

However, U.S. regulations isolate Huawei from Google’s Android operating system and the suite of developer services on which the majority of Android apps are built, restricting the appeal of Huawei handsets outside of China.

Tools for chip design

Research companies recognized In March, Huawei said that its electronic design automation (EDA) tools for chips manufactured at and beyond 14 nanometers (nm) technology had advanced.

Before semiconductors are mass-produced in fabs, chip design companies use EDA software to create the blueprints for the chips.

According to the research firms, which are quoting their own industry sources, SMIC’s N+1 manufacturing method and Huawei’s EDA software might be combined to produce chips with a size similar to 7 nm, the potent semiconductors that are commonly seen in 5G phones.

Washington forbade SMIC from purchasing an EUV machine, a cutting-edge chip manufacturing tool from the Dutch company ASML that is essential to the production of 7 nm devices.

However, some analysts have discovered evidence that SMIC has nevertheless been able to make 7 nm devices by modifying smaller DUV machines that it could still readily purchase from ASML.

The second research company reported that it had seen Huawei request SMIC develop chip components for 5G goods below 14 nm this year. According to Doug Fuller, a chip researcher at the Copenhagen Business School, the anticipated yield rate of less than 50% means that 5G chips “are going to be expensive.”

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