The unbelievably high cost of the war against Huawei (first analysis)

U.S. companies were selling $11 billion a year of parts to Huawei before the blockade. Losing those sales is just the start of the damage. Every other Chinese and Russian company is making sure to find non-US suppliers. The U.S. has threatened India and Turkey with sanctions as well.

As other companies replace US components, the impact will be tens of billions more than the $11 billion of Huawei suppliers. Redesigning mobile phones and other products can take from three months to three years, so sales will be lost over time.

The relative decline in sales at Qualcomm and Broadcom suggests they are seeing other customers are cutting back, not just Huawei. That isn’t certain yet, however.

European companies are considering similar self-protection. A very senior German engineer tells me German companies in automotive and electronics are also designing out components only available from the US. Given how few electronic products are produced and manufactured in the US, the ultimate impact can be huge.

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5G Huawei radios do not contain US parts

Huawei has developed custom chips that replace the FPGAs previously bought from US companies Xilinx and Intel/Altera. Those were the only major components of 5G cell site radios that were hard to source in Asia. Huawei has shipped 200,000 5G radios in 2019 and is ready to produce 1,500,000 or more in 2020.

“We carried out the testing in August and September, and from October on we will start scale production,” according to Ren. Reuters also reports Huawei’s Will Zhang believes,” the performance of the U.S.-free base stations was ‘no worse’ and the company ‘has had positive surprises'”. 

FPGAs are semi-custom ships that replace multiple chips on a circuit board. They are slower and use more power than a custom-designed chip, so mostly are used for first trials and short runs.

It takes several months and costs millions to produce a dedicated chip. The industry practice is to switch from FPGA’s when the design is set and tens of thousands of units need to be produced. ZTE also has a dedicated chip; Nokia and Ericsson are rumored to be working on same.

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Ren to Donald Trump: Take our 5G, please

Ren Zhangwei tells the Economist and the NY Times he is prepared to give the US essentially everything the President has asked, including the crown jewels: the complete design and source code of Huawei’s 5G system. Ren

would license the entire Huawei 5G platform to any American company that wants to manufacture it and install it and operate it, completely independent of Huawei.

This actually would be a brilliant move if the US buys in. (Unlikely.) Huawei has no chance to make significant sales in the US, as the Democrats and Republicans compete on who will “be tougher” on China. A 10-25% royalty – which is cheap for the complete system design – would bring Huawei $billions more than it would otherwise earn in the US.

Any deal would be a boost to US manufacturing, speed 5G deployment, and provide a good answer to any security issues. It remains unlikely for US political reasons.

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Huawei far ahead in AI surveillance

Huawei, at left, is in 50
of the 75 countries

Huawei is far ahead of all rivals in surveillance using artificial intelligence, according to the Carnegie Endowment. (Larger image below.) IBM, Cisco, and Palantir combined are in 26 countries. Hikvision is in 15 countries, NEC in 14. Nearly all of those 75 countries are doing facial recognition. No one reading this needs me to add my opinion to the data.

Steven Feldstein discovered, “Liberal democracies are major users of AI surveillance. The index shows that 51 percent of advanced democracies deploy AI surveillance systems. In contrast, 37 percent of closed autocratic states, 41 percent of electoral autocratic/competitive autocratic states, and 41 percent of electoral democracies/illiberal democracies deploy AI surveillance technology1 Governments in full democracies are deploying a range of surveillance technology, from safe city platforms to facial recognition cameras.”

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Super Uplink from Telecom and Huawei

Uplink 5G is severely limited by the small antennas and relatively modest power in a mobile phone. Typical wireless networks have some unused spectrum in lower frequencies assigned to uplink, but it’s been difficult to use that spectrum to add to 5G uplink capacity.

Adding more uplink bandwidth to the signal has not been trivial. The 5G mid-band and mmWave use TDD (Time Division Duplexing.) TDD switches between upstream and downstream in the same spectrum. Lower bands use FDD (Requensy Division Duplexing.) FDD uses different frequency bands for upstream and downstream.

The claimed result: 5G uplink performance improved 20% to 60% near the cell site. Uplink doubled or more at the edge of the cell.

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Big AI problem? Ask Huawei Cloud

Huawei’s new Atlas 900 cluster for AI processing ran the ResNet-50 test in 59.8 seconds. Ken Hu claims that is 10 seconds faster than the previous record. At Huawei’s big Connect 2019, Hu offered

We’re making it available at a great discount for universities and research institutes around the world. If you’re interested, go ahead and apply now – we’d love to have you try it out.

I’m sure that’s a genuine offer; no company has been more generous with basic research than Huawei and its US$17B R & D budget. The inhouse developed operating system, a major achievement, will go open source in a few months. Google, Facebook, Microsoft, and Baidu have the capability, but few other non-classified entities.

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Huawei new Kirin 990 contains advanced ARM 77

Apparently, ARM has dodged the American blockade and is now selling its most advanced designs to Huawei. Arm China spokesperson Liang Quan tells Sina.com
 
“We are actually actively communicating …  we have recently confirmed that Arm’s follow-up infrastructure can also be licensed to Chinese customers, including Huawei.”
 
ARM processors are the heart of Huawei’s mobile chips; ARM’s public cutoff of Huawei could have been a major problem. ARM UK’s official comment is  
 

Arm continues to comply with the guidelines set forth by the U.S. Commerce Department. Under those current guidelines, Arm cannot license any IP subject to U.S. export controls to HiSilicon unless granted an export license by the US Commerce Department. However we are not providing any details on which Arm IP products are subject to U.S. export controls.

which I consider a non-denial. I have to go with what I have.  
 
I’ve passed the story to a DC reporter who will presumably get the facts. Tech reporters are also about to jump on this with the Kirin 990 announcement.
 
ARM is a British company owned by Softbank in Japan.  It was a great coup when the US security apparatus persuaded the company to cut off Huawei, one of ARM’s most important customers. 

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Huawei: U.S. hacking us

I shouldn’t have been surprised by the news that the US is attacking Huawei’s systems. As Ed Snowden taught us, the US monitors an extraordinary section of the Internet.

The Huawei statement below describes in colorful terms the pressure and harassment of Huawei employees and partners. It reads true. But I believe one comment about the U.S. to be inaccurate: “it has been using every tool at its disposal.”

I do not believe Huawei has been the object of missiles fired from U.S. drones. Nor have I seen any evidence of the work of CIA assassins, as documented in the Frank Church congressional hearings.

The WSJ, as noted below, seems to be doing sloppy journalism perhaps from targeted government leaks.

Media Statement Regarding Reported US DoJ Probes into Huawei (more…)

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Berkeley, Stanford funded

Goldsmith with honorary PhD

The research group of Andrea Goldsmith at Stanford, one of the world’s leading communications researchers, received about half its funding from Huawei. Matt Drange now reports that the company has donated $7 million to Berkeley. It has also been a supporter of MIT’s Media Lab and spends $300 million per year supporting university research around the world.

Universities in the US have a strong tradition of academic freedom, but all three universities have now forbidden faculty from accepting funding from Huawei. Two senior faculty members have confirmed to me the US government put the universities under pressure. Neither is funded by Huawei. MIT gets half a billion a year in federal funding.

Nearly all the money went to basic research, for which corporate money is rare.

Dredge has a useful set of documents from Berkeley with details of the grants.

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Huawei’s very red world

This map shows countries working with Huawei 5G in red and pink. Huawei is doing very well in 5G, although it’s not as dominant as the colors here suggest.

Ericsson is actually close to Huawei in 5G revenue, aided by the ban in the US and Australia. Years ago, Huawei was the price leader in order to break in to the European market. That’s no longer true, despite all the reporters that continue to make that claim. Ericsson made a corporate decision to match and occasionally beat Huawei’s prices.

Ren made a remarkable comment that Huawei would be hurt if it forced Nokia and Ericsson out of the market. Both are struggling financially. Ren made the point that competition spurs Huawei to do better. I’m sure he’s also aware of the political implications of knocking out Europe’s champions.

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Ren: Huawei can build 1.5M 5G radios in 2020

Radios could be a US$20+ billion product for Huawei in 2020 if orders come in. Very high sales are likely. China, Huawei’s primary market, plans 600,000-800,000 5G upgrades in 2020, some of which will involve multiple radios.

Huawei’s replacement of US parts is effective. Many designs require FPGA programmable chips, one of the few products where the US is still dominant. Ren implies that Huawei no longer requires FPGA’s. The only other important US-dominated product is radio frequency chips, where Huawei also is making progress.

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Huawei: Samsung’s 5G soon illegal in China

Starting January 1 2019, China will require all new phones to support the SA 5G core. The nominal reason is China wants to promote the SA core. Huawei 5G chips are ready for SA but no others are.

On Weibo, Huawei’s consumer business CEO Yu Chengdong wrote, “I hope everyone can provide true 5G mobile phones. NSA will soon be eliminated, SA is true 5G.” Sina.com believes that’s an indirect warning about Samsung.

Zhang Daijun of Samsung Mobile replied,

NSA and SA have no perceptual difference to ordinary users, and SA will have different perceptions for some industry users.

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