U.S. war on Huawei may kill $2B Finisar merger

China’s State Administration for Market Regulation is holding up the takeover by II-VI of rival component maker Finisar. There are already too few companies making high-end components. A good argument can be made to block the deal on competition grounds.

Finisar makes some of the most advanced optical components. Huawei produces many of its own optics and can work around the U.S. blockade. It will continue buying components from the U.S. if permitted and wants to always have that option.

China is such a large part of the global market for electronics that it can effectively block any merger. The institutional investors that own most of Finisar will suffer a loss of several hundred million if the deal doesn’t go through.

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2,100,000 Huawei 5G base stations in 2019 & 2020

Ren Zhengfei says Huawei in 2019 will produce, “600,000 5G base stations, which will grow to around 1.5 million in 2020.” That’s an enormous number. The U.S. in total has under 400,000 bases.

I’ve been raising my estimates for 5G and I think I am still too low. China alone may do more than 200,000 radios in 2019 and 600,000-800,000 in 2020. China won’t stop until most of the two million cells are upgraded.

Korea will do 100,000 cells this year and cover 90%+ of the country. The country just passed 2 million 5G subscribers and is adding 500,000 per month. LG+ is using Huawei radios while SK & KT are using Samsung. Preliminary data is that all three networks are working pretty well. There is little performance difference apparent between the Huawei and the Samsung gear.

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HiSilicon producing 30%+ of Huawei’s radio frequency components

Mate 20 teardown

Radio frequency chips are the most important component Huawei needs in which American companies are far ahead. 5G phones have to support dozens of frequency bands at a very high speed and great precision.

Only the very best chip designers can deliver what’s needed in a very small module. It requires special materials and state of the art processing.

“Huawei is producing 30% of their RF components,” Qorvo CEO Robert Bruggeworth told investors.

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$17B in 2019 research, up >10%

Huawei is having a rough year, with sales only up 23% to US$58 billion. Phone sales were only 118 million units, up a mere 24% in a declining market. Net profit was only about $5 billion.

Chairman Liang Hua carefully did not mention the threat to Huawei’s survival more than five times. He did, however, show pictures of the bullet-riddled plane, symbolizing what Huawei has to face.

Huawei sales were less than Google ($75 billion) or Microsoft ($64 billion.) Apple, Amazon, and AT&T remain larger. The combined sales of Alibaba and Tencent (~$55 billion) or Facebook and Disney (~$59) are just about as large as Huawei’s revenue.

Kidding aside, Huawei is doing fine.

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Trump calls Intel, Micron, Google CEOs “lying hypocrites” (Opinion)

Intel and Micron busted Trump’s Huawei boycott by finding loopholes and resumed shipping to Huawei. Google very publicly called Trump’s demand they block Huawei from Google apps a major national security mistake.

Trump summoned to the White House Sundar Pichai of Google, Chuck Robbins, of Cisco, Robert Swan of Intel, Sanjay Mehrotra of Micron, Stephen Milligan of Western Digital Corporation, Steven Mollenkopf of Qualcomm, and Hock Tan of Broadcom.

“The CEOs expressed strong support of the president’s policies, including national security restrictions on United States telecom equipment purchases and sales to Huawei,” the White House said.

Washington is a city of lies, so perhaps that is what they told the President. Alternately, the CEOs might have been lying when (most of) them promised support for China.

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A mobile phone with an all-glass frame?

Sina.com has a picture that may be a future Huawei phone with no metal in the frame.

Huawei was the innovator with two and then three cameras, with software combining them for great pictures. Apple and everyone else are still catching up.

With a $15B research budget there will be a lot more coming.

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Huawei building a map like Apple & Google

High precision maps are a huge strategic advantage, consulted every day by hundreds of millions. Caixin speculates this is the first step into producing an autonomous car. There’s a more obvious path to profit using the data on the web and selling map data. Uber paid Google US$68 million for map data.

The quality of the information in Google’s Waze astounds me. It warns us of an obstacle coming up on the highway and offers alternate routes when it detects congestion. We almost never get lost anymore. Building a map of that quality costs hundreds of millions.

Huawei is now facing the Law of Large Numbers. It’s so big in telecom network gear there’s almost no way to grow. It looks to become #1 in mobile phones. It needs to find new lines of business to grow.

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$300-$420 Mate 20 Pro a great buy

“It’s pretty badass,” Andrew Hoyle says in his CNET review. “The Huawei Mate 20 Pro’s impressive list of features puts it unquestionably among the top phones of the year.”  (emphasis added.) In particular, the triple camera is excellent.

It recently sold at prices from $700-$1,000. Telefonica/O2 in the U.K. is now selling the phone for an implicit price of well under $400. For £20.00, you get unlimited voice and messages – and the phone.

The total, including an upfront £99.00, is £579. (US$721.) When you put in any sensible valuation for the service, the effective price of the phone is half what it has recently cost.

The Mate 30 Pro is due soon, possibly October or November. Price drops on older models are common. Huawei presumably has a large inventory of Mate 20’s given the recent problems. Rumours have the Mate 30 with a quad camera, a more advanced processor built on TSMC’s 7 nm EUV, and possibly the new Ark/Hongmeng OS, a fast alternative to Android.

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Ren: Adding 25,000 jobs and remaining profitable

Huawei is aggressively recruiting engineers around the world, matching and bettering other company’s salary offers in networks, AI, machine learning, and even some basic research. It is adding 10,000 new recruits in China.

Overall, it is increasing employment from 180,000 to 204,000. It hasn’t cut and may be increasing the research budget of US$15 billion. It continues to distribute US$100’s of millions to universities.

Chinese press reports about Ren’s comments on Huawei sales and profits are unclear. C114 reports an estimate of profits similar to the eight billion in 2018.

If the drop in phone sales in Europe is reduced, the profits may be significantly higher.

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100M phones in 5 months as Huawei chases Samsung

Huawei sold 100 million phones in the first 149 days of 2019, despite the U.S. issues. Growth at that rate would easily take sales past 250 million.

In Q1 2018, Samsung had 23.5% of the phone market and Huawei 11.8%. In the first quarter of 2019, Samsung had 23.0% of the market and Huawei 18.9%.

Xiaomi, Vivo, and Oppo also increased sales. The share of “other” fell from 27.6% down to 22.7%. That corresponds to disappointing financial results at Sony & Lenovo.

Apple’s Q4 was 18.3% as it released new iPhones. But Q1 2019 was only 11.8%, down from 15.7% in Q1, 2018.

If Apple doesn’t find a way to bring 5G to the 2019 iPhone, it will be a very disappointing year.

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Jury say no to Huawei’s trade secret claims

Yiren Huang worked for Huawei designing NVMe storage controllers from 2011 to 2013. He left and co-founded CNEX, a company that specializes in similar chips.

Huawei contended Huang appropriated Plaintiffs’ trade secrets and poached fourteen Huawei employees. Huawei sued, but after a six-week trial a Texas jury refused to accept Huawei’s claims. It did decide “that Huang violated his Patent Agreement by not disclosing the patents he filed on behalf of CNEX.”

However, it refused to award damages to Huawei because the “violation did not harm Plaintiffs.” The jury also did not award any damages for CNEX’s counterclaims. No money or patents changed hands.

CNEX has since raised US$23 million from Microsoft, Dell, and others.

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To conquer: TV, glasses, car

TV & Smart glasses in red

Huawei is soon to announce an 8K TV with a 5G connection, the first is what will be a strategic family of TV products. He Gang, President of the Consumer Products Division, included TV as one of the 8 primary products in Huawei’s “1 + 8 + N” future plans.

While the TVs have longed been rumored, the surprise was that He listed “smart” glasses as a second primary product. Perhaps in a few years, many of us will be walking around with augmented reality glasses. If so, Huawei wants to supply them.

Google Glasses failed because the technology was too early. Google is now bringing then back for business uses. Huawei hopes to catch a wave in a few years.

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