[Chipformation] HiSilicon, the Key Contributor to Huawei's New Phone Launch

Huawei's new smartphone, the 'Mate 60 Pro,' has become a signal of Huawei's resurgence against U.S. semiconductor sanctions and a spectacular comeback for Hisilicon. Hisilicon, a 100% subsidiary of Huawei known as Haishi (海思) in China, is a semiconductor design company (fabless) established in 2004 in Shenzhen, Guangdong Province, the year after Huawei spun off its mobile phone business. It is currently not listed on the stock market.

Hisilicon, which had not been frequently mentioned in the semiconductor industry for some time, has recently been appearing often in the news because it designed the application processor (AP) 'Kirin 9000s' used in Huawei's Mate 60 Pro smartphone.

In particular, the industry is surprised that it was developed using a 7nm (nanometer, one billionth of a meter) process processor, which had been difficult to achieve with only Chinese technology until now. The AP designed by Hisilicon is manufactured by SMIC (Semiconductor Manufacturing International Corporation, 中芯國際·Zhongxing Guoji), a Chinese foundry company, and Huawei installed it in its smartphones. This achievement?from AP design to chip manufacturing and complete phone production?was accomplished entirely with Chinese technology. Of course, there are suspicions that it was not made solely with 100% Chinese technology, as well as controversies over the AP's performance and yield being considerably low.

Hisilicon was once the most successful semiconductor design company in China, riding the wave of Huawei's popularity. Until the U.S. imposed semiconductor export restrictions against China in 2020, Hisilicon played a major role in enabling Huawei to become the number one smartphone brand in the Chinese market by adopting its own APs, which helped maintain price competitiveness amid a domestic product consumption boom fueled by patriotism.

Before the U.S. sanctions, Hisilicon was China's largest fabless company and emerged as a leading company driving China's semiconductor rise, ranking within the top 10 global semiconductor companies. In the first quarter of 2020, Hisilicon's AP shipments surpassed Qualcomm for the first time in the Chinese mainland market, setting a record.

However, Hisilicon's position changed 180 degrees once the U.S. sanctions began. Taiwan's TSMC, which was responsible for foundry services for Hisilicon's APs, refused to produce chips for Huawei, causing both Huawei and Hisilicon to collapse simultaneously. Hisilicon's engineers scattered to other smartphone manufacturers and semiconductor companies, and the company's revenue, which was $8.2 billion in 2020, plummeted by over 80% to $1.5 billion in 2021. Currently, Hisilicon's market share is close to 0%.

The semiconductor industry is closely watching the possibility of Hisilicon's revival with the launch of Huawei's new phone. Given the business structure that is absolutely dependent on Huawei, if Huawei's new smartphone sells like hotcakes, it is only a matter of time before Hisilicon's market share is revived.