China throws money at domestic chip firm as TSMC stops taking orders from Huawei

The US move to impose a ban on any US tech being used in the production of Huawei chips has sent shockwaves through the semiconductor industry.

A couple of reports illustrate this well. Bloomberg notes that the Chinese state is pumping $2.25 billion into Semiconductor Manufacturing International Corporation. This will apparently give the Chinese state even more control over the company than it had anyway and is clearly a move designed to accelerate the country’s move towards silicon self-sufficiency, despite the company name.

Meanwhile the Nikkei Asian Review reports that TSMC has stopped taking new orders from Huawei as a direct result of the US ban. This is pretty massive for TSMC as Huawei is one of its biggest customers, so you have to wonder if the decision was influenced by incentives as well as threats from the US.

Huawei, of course, is not impressed with the latest US move against it. Here’s the statement made earlier today at its virtual analyst event in full.

Huawei categorically opposes the amendments made by the US Department of Commerce to its foreign direct product rule that target Huawei specifically.

The US government added Huawei to the Entity List on May 16, 2019 without justification. Since that time, and despite the fact that a number of key industrial and technological elements were made unavailable to us, we have remained committed to complying with all US government rules and regulations. At the same time, we have fulfilled our contractual obligations to customers and suppliers, and have survived and forged ahead against all odds.

Nevertheless, in its relentless pursuit to tighten its stranglehold on our company, the US government has decided to proceed and completely ignore the concerns of many companies and industry associations.

This decision was arbitrary and pernicious, and threatens to undermine the entire industry worldwide. This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries. 

It will also impact communications services for the more than 3 billion people who use Huawei products and services worldwide. To attack a leading company from another country, the US government has intentionally turned its back on the interests of Huawei’s customers and consumers. This goes against the US government’s claim that it is motivated by network security.

This decision by the US government does not just affect Huawei. It will have a serious impact on a wide number of global industries. In the long run, this will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries.

The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests.

Huawei is undertaking a comprehensive examination of this new rule. We expect that our business will inevitably be affected. We will try all we can to seek a solution. We hope that our customers and suppliers will continue to stand with us and minimize the impact of this discriminatory rule.

According to the Global Times, Huawei had a cunning plan to order loads of chips from TSMC during the grace period included in the US measures, but the Nikkei story would appear to scupper that. To add insult to injury, Nokia has just announced a 5G network deal win with Taiwan Star Telecom. It increasingly looks like Taiwan is doing everything it can to distance itself from the Chinese state, something the latter is very unlikely to take lying down.

Ericsson and Nokia’ 5G duel moves to Taiwan

Both Ericsson and Nokia have won 5G RAN work with Taiwanese telco Chungwa Telecom, which they’re happy about.

In what is becoming a bit of a thing, Nokia and Ericsson simultaneously issued press releases announcing their 5G deal wins with Chungwa. This follows a similar PR race over Japanese MNO KDDI last month, except this time it looks like Ericsson got a bit more of the action. It’s also part of the broader industry pissing competition narrative that we chatted about in this podcast.

Ericsson will be helping Chunghwa out with its mid and high-frequency 5G radios on both an NSA and SA basis. On top of that it seems to be the sole supplier for the 5G core and will even provide fronthaul and IP backhaul transport. Nokia, meanwhile, is a lot less specific in its press release, just referring to NSA and SA 5G radio over multiple bands.

“Our enhanced 5G platform perfectly suits CHT’s needs to quickly launch new services to the market,” said Chafic Nassif, President of Ericsson Taiwan. “This cooperation will serve to not only provide Taiwanese consumers and enterprises with the highest quality communication services but also accelerate the overall progress of 5G development in Taiwan.”

“Our technology will assist Chunghwa Telecom in its early launch of 5G services in Taiwan, while also allowing it to explore new revenue generators across consumer and enterprise markets,” said Tommi Uitto, President of Mobile Networks at Nokia (do they not have a Taiwan dude?). “As one of the pioneering members of Chunghwa Telecom’s Taiwan 5G Alliance, we will jointly promote the digital transformation for public and private sectors to accelerate 5G momentum in Taiwan.”

“In the process of upgrading to 5G networks, we need to shorten the time it takes to launch new features,” said Max Chen, President of the Mobile Business Group at Chunghwa. “Ericsson’s 5G core solution enables our 4G core to flexibly evolve into a shared 4G/5G network. Meanwhile, Ericsson’s Cloud VoLTE solution will allow our customers to enjoy a more convenient and higher quality 4G voice service today as well as 5G voice services in the future.

“The transformation empowered by Nokia’s 5G technology will undoubtedly revolutionize the way we interact with the world. Chunghwa Telecom is committed to delivering industry-leading 5G to its consumer and enterprise customers, and we have every confidence in Nokia delivering this in a quick and reliable rollout.”

Chen’s Nokia comment was definitely weaker than his Ericsson one, wasn’t it? Nokia is always going to publicise its deal wins, but this announcement had a defensive feel to it and Nokia presumably knew Ericsson got a bigger piece of the action this time. So that seems to be one-all in East Asia for the two Nordic kit vendors and the season may well be suspended before we get a chance to go to extra time.

Qualcomm finally gets a legal win in Taiwan

The Qualcomm lawyers are building a reputation as the hardest working in the industry, though at least they no-longer have to battle the Taiwanese Fair Trade Commission.

The resolution of the dispute will come as a welcome relief, allowing the team to focus on other fronts against Apple, the European Commission and various, and the legal team have even saved Qualcomm quite a bit of cash. The deal reverses most of the $773 million fine, though it has agreed to up research commitments in the country.

“We are pleased to have reached a mutually beneficial resolution with the TFTC that puts the litigation behind us,” said Alex Rogers, President of Qualcomm Technology Licensing. “This settlement directly addresses concerns raised by the TFTC, regardless of disputed positions, and builds on our foundation of collaborative, long-term business relationships in Taiwan.

“We are happy to reaffirm our commitment to licensing our valuable intellectual property under principles of fairness and good faith. With the uncertainty removed, we can now focus on expanding our relationships that support the Taiwanese wireless industry and rapid adoption of 5G technology.”

As part of the agreement, Qualcomm will increase its research footprint in the country and has committed to spending $700 million over the next five years. In exchange, Qualcomm will stop getting fined and can continue to charge manufacturers royalties on its technology. The FTC will keep the $89 million Qualcomm has already paid, but will forget about the rest.

It will cost the chip giant cash in the long-term, but this is a minor price to pay in securing a future for its threatened licensing business. This was the major worry for investors, as it is a cash-cow, generating the majority of profits which few would want to see run dry. With Apple recruiting governments around the world in its battle against the licensing business model, this is a certainly a win for Qualcomm.

Qualcomm still faces various antitrust investigations around the world, building an expensive legal bill, but with Taiwan concluding the activities are not monopolistic or abusing market position, it is precedent which Qualcomm can point to.

Taiwan fines Qualcomm $773 million for antitrust violations

US mobile chip giant Qualcomm has been the recipient of yet another fine for claimed anticompetitive business practices.

This time it’s Taiwan, where its Fair Trade Commission has concluded that Qualcomm abused its dominant position in the mobile chip market for at least seven years by refusing to provide products to companies that didn’t agree with its conditions. The ruling itself is currently only published in Taiwanese, so the specifics are sketchy, but it looks like Qualcomm’s dominance is being used against it.

This is part of a growing number of legal actions against Qualcomm for similar reasons. At the end of last year Korea fined Qualcomm $850 million for very similar reasons. Europe is still in the process of investigating the company, the implications of which could be far greater, and Apple is putting its considerable resources into attacking the entire premise behind Qualcomm’s licensing business model.

As with many tech-related antitrust actions, it’s clear that once a company achieves a certain level of market dominance a different set of rules apply to its behaviour. Terms and conditions that would be considered acceptable in a more competitive environment are considered illegal when used by a company that is considered to be dictating the market.

Qualcomm hadn’t returned a request for comment at time of writing but it’s reasonable to assume it will appeal. The even bigger issue at stake for Qualcomm is not just the growing cost of these fines but its very way of doing business. The licensing model means that Qualcomm doesn’t just get revenue from selling its chips (mainly modems), but also a fee for every product sold that contains them. There is a growing movement opposing that model which must have Qualcomm very concerned.