and non-net reported on January 8 that yesterday, in order to reduce risks and reduce the production capacity allocated to Huawei , TSMC cut 20% of Huawei orders. There is news in the market that Huawei was affected by the US Department of Commerce’s entity list, and Google suspended business dealings with Huawei, resulting in the new generation of M30 series mobile phones being unable to use the GMS service, affecting overseas sales, so it cut orders in supply chains such as TSMC.
However, foreign investment companies issued the latest report pointing out that there is a misunderstanding of this statement.
Foreign capital said that on the one hand, Huawei did reduce overall orders due to weak overseas and M30 series mobile phone sales, but this is not new; on the other hand, Huawei HiSilicon Semiconductor did not cut orders with TSMC, but TSMC cut its wafer capacity allocation to HiSilicon Semiconductor by 20% in 2020. The reason is very simple, because TSMC's 7nm and 5nm production capacity is very tight, and TSMC sees the obvious risk of Huawei's excess inventory.
In the short term, the supply chain will inevitably be affected by the poor sales of Huawei mobile , but it will have little impact on most suppliers. In the medium term, TSMC's practice of reducing the production capacity allocated to HiSilicon is more beneficial to the supply chain. It not only reduces the risk of excessive inventory and excessive expansion of production, but also cools down the market's expectations for 5G too high.
In addition, foreign capital also pointed out that the news that Huawei cut orders has attracted the attention of investors in the past few days. According to multiple sources of information, HiSilicon’s smartphone AP wafer production at TSMC decreased by 10% to 15% in the first quarter of 2020. At the same time, HiSilicon’s 7-nanometer + 5-nanometer wafer production capacity at TSMC was reduced by 20%.
As for HiSilicon and TSMC, who will cut whom? Foreign capital pointed out that Huawei has cut orders across the upstream and downstream, but this matter is not that simple and not that bad.
Since mid-2019, Huawei has cut PCB and non-semiconductor-related components, including the loss of Huawei's overseas market share in smartphones without GMS support, coupled with its own poor RF solution performance and the transition from 4G to 5G; secondly, in response to the adjustment of HiSilicon's wafer production at TSMC, according to observations, it is mainly due to TSMC's concerns that Huawei smartphones and HiSilicon AP have too much inventory, and given its tight 7-nanometer production capacity, TSMC will allocate Huawei's production capacity to customers with actual needs to reduce the risk of future inventory and excessive production expansion.
Foreign investment analysis, Sun and Moonlight Investment Control's operating orders, Huawei mobile phone's package test business accounts for 80%, and the impact is relatively large. In addition, JingyuanDivision comes from Huawei's mobile phone packaging business, and it is estimated that there are about 20% orders. It is expected that the orders this quarter may also decline in the range of 15 to 20%. Furthermore, Lian Yong is a Huawei LCD driver IC supplier, and the order demand for touch and driver integrated chips (TDDI) is estimated to face a decrease in the range of 5%-10% this quarter.
However, how Huawei survived trade restrictions is a case worth studying. Huawei is a major customer of all its suppliers, some companies did cut ties after the trade restrictions were issued, and some suppliers lost to rivals from Japan and South Korea.
But those American companies whose businesses are all over the world, including Microsoft and chip manufacturer Micron Technology , have found legal ways to bypass restrictions and use production outside the United States, so that sales to Huawei will not be restricted. Huawei itself is also deploying a large team of engineers to redesign products to reduce its dependence on single-market supply.
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