There has been a lot of hoo-hah recently about Huawei semiconductor subsidiary HiSilicon moving away from being captive to its parent company and selling chips to the open market. This story started gaining traction around September last year and became more mainstream in December, when the IC design firm showed its 4G Balong chip at the Elexcon Expo in Shenzhen. This led to speculation that HiSilicon would also be releasing its Kirin mobile chipset to the open market as well, and this was a “new strategy” for HiSilicon that would pressure Qualcomm. But the truth is there is no new strategy, HiSilicon always had a non-captive side, and has no plans to release 5G Kirin chips to the open market. In fact, there probably isn’t even a market for them.
HiSilicon never was 100% captive
Most people assume HiSilicon is captive to Huawei. The media always refers to it as such. People are most familiar with its Kirin series of handset chips and would be correct in saying these are for Huawei’s use only, but this isn’t all HiSilicon does. Its Kirin (handset Application Processor), Balong (handset baseband), Tiangang (5G base station), Ascend (AI), and Kunpeng (server) chips are captive to Huawei, but for many years now it has sold a whole range of chips into the open market: video processing, camera, STB, TV, and NB-IoT. These chips don’t show up in ads for products, so they don’t grab headlines, despite selling in the millions. Industry insiders in China often talk about “Big HiSilicon” and “Little HiSilicon” to differentiate between the captive and non-captive sides of the business.
The 4G Balong chip it has begun selling to the open market is mainly targeting the IoT segment, not handset, and isn’t even a new chip—it has been around since 2014. A CAT-4 4G multi-mode chip can and will compete with Qualcomm in the IoT space—think bike sharing or point of sale devices. Balong is mainly made up of three other chips—baseband, RF, and power management—and doesn’t have the super powerful application processor it would need to be a full on handset chip. This is not the attack on the handset industry some suggest it is.
What if Kirin was available to all?
HiSilicon has given no indication that it plans on selling its more advanced Kirin 5G handset chips outside of Huawei. But what would happen it did take them to the open market? Who would buy them and what challenges would it face?
It is hard to see who would actually buy Kirin chips. Apple and Samsung certainly wouldn’t, having their own chip teams. I would expect other foreign firms, despite their struggles, to stay clear of Huawei technology as well.
That leaves local Chinese handset players such as Oppo, Vivo, and Xiaomi. The problem here is of course one of competition. Huawei handset sales, while dropping in the west, have grown significantly within China as the company has pivoted to some extent. This has eaten into local competitors’ sales, especially the likes of Xiaomi, which even saw co-founder Lei Jun step down as chairman.
While these local companies also have dreams of chip design themselves, they still use Qualcomm and Samsung chipsets for their high-end phones. Using a Kirin chip would mean losing any differentiation they had over Huawei and may even mean Huawei makes more profit from their phone sales than they do, not something I think they will want to do. There could also even be integration problems: HiSilicon is used to integrating with Huawei but integrating with other manufacturers may mean it has to design its chips differently in the future, adding to complexity and cost.
The mobile chip market is notoriously difficult to enter, and a number of companies like Renesas and Ericsson have given up over the years. The low and mid-end of the market already has Unisoc and MediaTek, and in the high end there is Qualcomm and Samsung. I do not see space for Huawei. At best, in some dystopian tech decoupling future domestic companies could be forced to use Kirin chips or other domestic companies like Unisoc’s or even ASR’s.
Perhaps it makes sense for domestic companies to use non-5G Kirin chips in cheaper phones. Samsung has done something similar before with Unisoc, but again, low end isn’t where the growth is now, so why bother going through the trouble?
As of now, fighting to get its chips in non-Huawei phones isn’t something HiSilicon plans to do, and I don’t think it would be beneficial to the company. It has bigger fish to fry.