SHANGHAI (Reuters) – The latest U.S. government action against China’s Huawei takes direct aim the company’s HiSilicon chip division—a business that in a few short years has become central to China’s ambitions in semiconductor technology but will now lose access to tools that are central to its success.
FILE PHOTO: The U.S. flag and a smartphone with the Huawei and 5G network logo are seen on a PC motherboard in this illustration taken January 29, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
That could make it the most damaging U.S. attack yet against a Chinese company that U.S. officials told reporters Wednesday functioned as a “tool of strategic influence” for the Chinese Communist Party. Huawei Technologies Co Ltd for its part denounced the U.S. allegations and called the new measures “arbitrary and pernicious.”
Established in 2004, HiSilicon develops chips mostly for Huawei, and for most of its existence has been an afterthought in a global chip business dominated by U.S., Korean and Japanese companies. Like most electronics firms, Huawei relied on others for the chips that powered its equipment.
But heavy investment in research and development helped drive rapid progress at HiSilicon, and in recent years the 7,000-employee unit has been central to Huawei’s rise as a dominant player in the global smartphone business and the emerging 5G telecom networking business.
HiSilicon’s Kirin smartphone processor is now considered to be on par with those created by Apple Inc (AAPL.O) and Qualcomm Inc (QCOM.O) —a rare example of an advanced Chinese semiconductor product that competes globally.
HiSilicon is also central to Huawei’s leadership in 5G, stepping into the breach when the United States cut off access to some U.S. chips last year.
In March, Huawei revealed that 8% of the 50,000 5G base stations it sold in 2019 came with no U.S. technology, using HiSilicon chipsets instead.
But the U.S. export control rule, first reported by Reuters last week, aims to block HiSilicon’s access to two crucial tools: chip design software from U.S. firms including Cadence Design Systems Inc (CDNS.O) and Synopsys Inc (SNPS.O), and the manufacturing prowess of “foundries,” led by Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), that build chips for many of the world’s top semiconductor firms.
With the new restrictions，HiSilicon “will be in a situation where they’re not able to manufacture chips at all, or if they do, then they’re not leading edge anymore,” says Stewart Randall, who tracks China’s chip industry at Shanghai-based consultancy Intralink.
Without its own processors, Huawei will lose its edge over domestic smartphone rivals, analysts said. International sales had already been gutted by a ban on the use of key Google software.
Industry sources say Huawei has stockpiled chips, and the new U.S. rule will not go into full force for 120 days. U.S. officials also note that licenses could be granted for some technologies. HiSilicon can also keep using design software it has already acquired.
HILSILICON IN TOUGH SPOT
Still, analysts agree HiSilicon is in a tough spot. Nearly all chip factories globally — including China’s leading foundry, Semiconductor Manufacturing International Corp (0981.HK) — buy gear from the same equipment makers, led by U.S. firms Applied Materials Inc (AMAT.O), Lam Research Corp (LRCX.O) and KLA Corp (KLAC.O).
The new U.S. rule requires licenses for companies using U.S. machinery to build Huawei-designed chips and delivered to the Chinese firm. To be sure, the new rule will not catch items shipped to a third party, allowing HiSilicon’s fabricators like TSMC the ability to ship chips to HiSilicon’s device manufacturers who can send them directly to a customer.
While there are alternatives to American machines – Japan’s Tokyo Electron Ltd (8035.T), for example, makes gear that competes with Applied Materials – replacing U.S. technology is not as simple as swapping out a machine.
“You almost have to think about it like a heart transplant,” said VLSI Research Chief Executive Dan Hutcheson, noting that chip production lines are finely calibrated systems where everything has to work well together.
Doug Fuller of the Chinese University of Hong Kong said Huawei had a few options. It could slip around the rule by having suppliers ship directly to Huawei customers, though the U.S. officials said they would be vigilant about such workarounds.
Huawei and the Chinese government could re-double efforts to build production capabilities that did not require U.S. tools, by investing in nascent Chinese competitors and buying from Japanese and Korean firms, even if that required quality sacrifices.
Or Huawei could turn away from HiSilicon and revert to buying from overseas suppliers—just not American ones. “There’s talk of Huawei just turning to Samsung processors,” for its smartphone, said Fuller.
Reporting by Josh Horwitz in Shanghai; Additional reporting by David Kirton in Shenzhen and Stephen Nellis in San Francisco; Editing by Jonathan Weber and Lisa Shumaker
Google dangles paid upgrade to businesses using Gmail addresses
Google Workspace Individual, which starts at $7.99 monthly including a temporary $2 discount, adds to the company’s expanding efforts to have users subscribe to some of its services such as YouTube and Google Photos in exchange for more support and features than are available for free. Subscription sales could help Google grow revenue beyond advertising.
The small-business offering compares with existing plans aimed at larger organizations that have their own websites to use in email addresses.
Javier Soltero, vice president for Google Workspace, told reporters that his unit had been informally saving photos of business cards or work vehicles mentioning an “@Gmail.com” address to “remind ourselves of the sheer number of people using our consumer products to run their businesses.”
Those that upgrade for appointment booking, newsletter production and other tools should be able to provide a more professional experience to clients, he said.
Workspace Individual will launch soon in the United States, Canada, Mexico, Brazil, Australia and Japan.
Google announced other changes to Workspace on Monday. Big businesses will be able to control encryption of their files on Google Drive for the first time and prevent Google from unlocking them. Airbus SE is an early customer.
All users now have access to Google Chat, the company’s successor to instant-message program Google Hangouts.
Now for the first time in years, free and paid users alike will have the same set of chat and email services, providing a common foundation that makes it simpler to develop new features, Soltero said.
(Reporting by Paresh Dave; Editing by Marguerita Choy)
Facebook says remote working move could slow jobs growth in Ireland
Facebook still plans to “aggressively” grow staff numbers in its European headquarters in Ireland but a company-wide policy allowing permanent remote work from other countries could slow that growth over time, its Irish chief said on Friday.
Ireland’s economy is hugely reliant on multinational firms that employ around one in eight Irish workers and any move to facilitate remote working abroad would add to the challenge already posed by a planned global corporate tax overhaul.
Facebook, which is one of Ireland’s largest such employers with around 3,000 full-time staff and another 3,000 contractors, will allow some workers to permanently relocate after more than a year of many working remotely due to the COVID-19 pandemic.
Eligible employees in Facebook offices in Ireland, France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom will be able to move to another one of those locations. U.S.-based staff can also move to Canada, it added.
Facebook Ireland’s Gareth Lambe said it was still working out how many Irish-based employees would be eligible to take advantage of the policy. Fewer than half of its staff are Irish nationals.
“We’re going to continue to grow aggressively,” he told national broadcaster RTE, citing a move in the next year or two to a new 57,000 square metre campus in Dublin that it intends to fill with 7,000 employees.
“This won’t have on balance a material impact on the growth of employment for Facebook in Ireland,” he said, referring to the remote working policy. “We have a target this year of adding about an additional 700 employees and we’re going to continue to do that and we’re going to continue to grow,”
“But this is a significant evolution and in the future over the coming years and decades, it is possible that the growth of jobs and numbers may not be as fast in Ireland as it would have been before it.”
Lambe said Facebook’s main Europe, Middle East and Africa decision makers will continue to be based in Dublin, meaning its corporate tax status will not change. However those permanently relocating abroad would no longer pay income tax in Ireland.
Responding to the move, Irish Finance Minister Paschal Donohoe said one of the consequences of the pandemic will be a lot more mobility of workers across national borders but that foreign direct investment will remain “an indispensable part” of Ireland’s economic model.
(Reporting by Padraic Halpin; Editing by Frances Kerry)
Apple hires former BMW executive for car project
Apple Inc has hired Ulrich Kranz, a former senior executive at BMW AG’s electric car division, to help its vehicle initiatives, Bloomberg News reported on Thursday, citing people familiar with the matter.
Kranz will report to Apple veteran Doug Field, who led development of Tesla Inc’s mass-market Model 3 and now runs Apple’s car project, the report said.
Apple did not immediately respond to Reuters request for comment.
The iPhone maker’s automotive efforts, known as Project Titan, have proceeded unevenly since 2014 when Apple first started designing its own vehicle from scratch.
In December, Apple said it was moving forward with its self-driving car technology and targeting to produce a passenger vehicle that could include its own breakthrough battery technology by 2024.
(Reporting by Mrinalika Roy in Bengaluru; Editing by Shinjini Ganguli)
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