In 2018, for Taiwanese ICT hardware companies, Huawei was already the second-largest customer after Apple. Total purchases from Taiwan were valued at US$12 billion in 2018. They are expected by industry sources to reach US$15 billion in 2019 according to Business Today (今周刊). Taiwanese companies supply lenses (Largan precision, also a supplier of Apple), provide assembly (FIH Mobile, a subsidiary of Foxconn), and sell radio-frequency IC modules (Richwave). Huawei also buys Taiwanese equipment for 5G infrastructure – for example, Huawei’s 5G base stations are equipped with TSMC semiconductors.
Naturally, Huawei’s 5G business is a huge opportunity for the Taiwanese semiconductor industry because integrated circuits are essential to smartphones, base stations, Internet of Things devices, etc... In 2020, US$12 billion are planned to be invested in new production sites in Taiwan. Taiwan has a global leader, TSMC, and an ecosystem of strong players present in the manufacturing (United Microelectronics Corporation, UMC), fabless IC design (Mediatek), packaging and testing (ASE Technology in Kaohsiung and SPIL in Hsinchu). Taiwanese companies represent 72,2% of the global integrated circuit manufacturing (an industry worth US$47 billion globally in 2018), and 55,9% of the packaging and testing. Adding IC designing and memory sticks, the Taiwanese semiconductor industry weighs 14,9% of the global market .
Today Huawei’s high-end smartphones use the Kirin chip series designed by Hisilicon. Mid-range products run on Snapdragon, designed by the American company Qualcomm. Low-end smartphones, such as the Y6, use the Helio series designed by MediaTek, a Taiwanese company. Despite being designed by three different companies, all are manufactured by the same Taiwanese foundry, TSMC. An alternative may emerge to TSMC manufacturing for low-end and mid-range chips that do not require the best semiconductor technology, but on the high end of the smartphone markets, the competition between Samsung, Apple and Huawei is in fact a competition between the two companies that have the capacity to build advanced fabs: Samsung, that manufactures its own chips, and TSMC, that powers IPhones and Huawei devices.
There are several examples of potential winners in the Taiwanese tech sector. For Mediatek, the largest integrated circuits designer in Asia, Huawei represents only 3% of its total sales in 2018. But since Mediatek’s new 5G system-on-chips will be available for sale next year, this percentage is set to increase and future business with Huawei might develop beyond smartphones. Win Semiconductors, a company that produces gallium arsenide, a key compound for the production of semiconductors, is expecting an increase in orders – today, Huawei already accounts for 10% of Win’s sales. Companies manufacturing components integrated in the fabrication of small cells, such as Sercomm and Alpha Networks, are expecting a boom. Indeed, 5G runs on high-frequency radio waves that have higher bandwidth and that better support increased capacity than lower frequency networks, but provide less coverage – hence the need for deployment of small cell technology in base stations. In addition, if the US ban on Huawei is confirmed, Macronix will have an opportunity to take over part of Micron’s memory chips business with Huawei.