Huawei, a leading Chinese tech giant, is facing a significant shift in its production strategy due to soaring demand for its artificial intelligence (AI) chips. This heightened demand, coupled with manufacturing constraints, has prompted Huawei to prioritize the production of its Ascend AI chips, leading to a slowdown in the production of its premium Mate 60 smartphones. The Ascend 910B, a key product in Huawei’s AI chip lineup, is deemed the most competitive non-Nvidia AI chip available in China, highlighting the firm’s pivotal role in the domestic AI market amidst the Sino-U.S. technological standoff and recent U.S. restrictions on AI chip sales to China.
The prioritization of AI chips over smartphone production comes as Huawei aims to rebuild its smartphone unit, which was severely impacted by U.S. sanctions in 2019. These sanctions restricted Huawei’s access to advanced chipmaking tools, citing national security concerns, a claim Huawei has consistently denied. The company’s move to prioritize AI chips reflects broader trends in the global tech industry, where AI functionality is becoming increasingly crucial, and the U.S. has imposed restrictions aimed at limiting China’s access to advanced AI processing technology.
Huawei’s efforts to navigate these challenges have led to innovative approaches in chip manufacturing, including collaboration with China’s largest contract chipmaker, SMIC, to develop chips capable of 5G telecommunication speeds using deep ultraviolet lithography machines. This approach, while more laborious and expensive than using advanced extreme ultraviolet machines, showcases Huawei’s resilience and adaptability in the face of U.S. sanctions.
The production shift has also affected other Huawei products, including the Ascend-equipped computing unit MDC 810, which powers advanced driver assistance systems. This bottleneck has led to delays in the delivery of flagship models by Chinese automakers. Despite these challenges, Huawei’s Mate 60 series has contributed to the company regaining its status as China’s top smartphone seller in early 2024 for the first time since the end of 2020, demonstrating the brand’s enduring popularity and market influence despite production and supply constraints.
This situation underscores the complex interplay between geopolitical tensions, technological innovation, and market dynamics in the global tech industry. As Huawei adjusts its production priorities in response to both external pressures and internal ambitions, the company’s strategies offer insights into the broader challenges and opportunities facing tech firms in China and worldwide​​​​​​.
