Huawei's new Shanghai chip factory may be a way around the U.S. ban

What you need to know

• Huawei is reportedly building a new chip factory in Shanghai, dedicated to making parts for its telecom hardware business.
• If Huawei succeeds in manufacturing its own chips, the move could potentially bypass U.S. sanctions and maintain Huawei's business in telecom infrastructures.
• While Huawei plans to use its new chips for IoT devices and 5G network hardware, there's currently no word yet on how the factory would affect Huawei's phone business.

According to a recent report by the Financial Times, Huawei has plans to build a chip factory in Shanghai, which would be dedicated to manufacturing parts for its telecom hardware business.

Huawei has repeatedly faced significant hurdles in maintaining its telecom infrastructure business as the U.S. and other foreign governments continue to place further sanctions on the company. However, if the new Shanghai factory could make Huawei self-reliant in making its own chips, the move could potentially bypass the recent U.S. trade ban.

The factory will reportedly be run by Huawei's partner, Shanghai IC R&D Center, and it would generally be considered an experiment until the chip manufacturing processes are ready for Huawei's end-user products.

Based on the report, the factory will initially be used to create legacy 45nm chips. The plan is to then move on to 28nm chips by 2021 and 20nm chips by 2022. This long-term timeline would indeed set Huawei behind its telecom hardware competitors in terms of scale and technological prowess. However, the investment could certainly lead to a totally self-reliant manufacturing process, which could be very beneficial for the company.

While these chips would be used for smart TVs, IoT devices, and 5G network hardware, there's no word yet on if the factory would be used for Huawei's phone business. Ever since the U.S. banned Google services from Huawei mobile devices, there's no question that Huawei's phone business has been struggling to find a place outside China.

Although there are encouraging reports that some U.S. chipmakers may be able to sell parts to Huawei, the change still bans the company for buying parts for its 5G business. There are also no certainties on what the U.S. government will decide next in terms of the trade ban.

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