In response to surging demand for its artificial intelligence (AI) chips and ongoing manufacturing challenges, Huawei, the Chinese tech giant, has made the strategic decision to prioritize AI chip production over its premium Mate 60 smartphones. This move sheds light on the complex interplay between global competition for AI technology, manufacturing constraints, and the ongoing Sino-U.S. technological standoff.
The dual-production facility responsible for Huawei’s Ascend AI chips and Kirin chips, which power the flagship Mate 60 phones, faces difficulties attributed to a low yield rate, indicating potential production quality issues, according to sources familiar with the matter. The situation has compelled Huawei to temporarily scale back production of the highly anticipated Mate 60 series.
This development comes at a crucial time for Huawei, as the company recently claimed the top spot in Chinese smartphone sales for the first time in over three years, coinciding with a global race for AI functionality. The impact of U.S. sanctions in 2019, cutting off Huawei’s access to advanced chipmaking tools, has been a significant challenge for the company, which has been working to rebuild its smartphone unit.
Despite the setback, Huawei remains silent on the matter, declining to comment on the specifics of the production slowdown. Analysts suggest that the current situation underscores the broader implications of U.S. restrictions on AI processing chip sales to China, prompting a shift in the market landscape, with domestic alternatives gaining traction.
The Chinese government’s initiative to enhance the country’s computing power has driven local authorities to announce data center projects, fostering public and private demand for Huawei’s Ascend series. The Ascend 910B, in particular, is widely considered the most competitive non-Nvidia AI chip available in China.
Huawei’s decision to prioritize Ascend chip production over Kirin chips signals a short-term adjustment, as the company is actively working to improve its yield rate, ensuring a steady supply of usable chips. The firm’s low-key approach to chip manufacturing has drawn attention, with little public information available about its progress and methodology.
The Mate 60 series, equipped with Chinese-made chips capable of fifth-generation (5G) telecommunication speeds, has faced consistent stock shortages, with customers reporting month-long waiting times for pre-orders to be fulfilled. Despite these challenges, the Mate 60 has played a pivotal role in Huawei’s resurgence as China’s leading smartphone seller in the early weeks of 2024, according to data provider Counterpoint.
In addition to the Mate 60 phones, other Huawei products, including the Ascend-equipped computing unit MDC 810, which powers advanced driver assistance systems, have also been affected by the production bottleneck. Last week, reports surfaced that Chinese automakers had to delay the delivery of flagship models due to issues related to the MDC 810 production. Huawei’s ability to navigate these challenges will undoubtedly shape its future in the fiercely competitive tech landscape.
