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With sanctions cutting them off from doing business with Huawei and with many Chinese smartphone companies looking for domestic alternatives, Qualcomm’s prospects in China are dimming
It goes without saying that 2020 was a tumultuous year for China–US relations, with Chinese vendor Huawei particularly forced to face the brunt of numerous US sanctions. Now, with newly inaugurated President Joe Biden at the helm, it remains to be seen if relations between the two countries will improve in 2021.
In the meantime, however, it is becoming increasingly apparent that the US sanctions, while certainly damaging to the Chinese companies, are also acting as something of a double-edged sword, cutting US companies off from major business interests in China.
Take Qualcomm for example. As of Huawei’s addition to the so-called Entity List back in 2019, the company has not been able to supply Huawei with smartphone chips. Now, a new report by CINNO is showing that Qualcomm’s shipments to China shrank by 48.1% year-on-year, with their Chinese market share falling to 25.4%, down from 37.9% in 2019.
The US sanctions have also affected the market in less direct ways. With a crippled semiconductor supply chain, Huawei has been increasing investment in its own chip firm HiSilicon, as well as the Chinese government driving investment in the sector in general. Furthermore, other Chinese smartphone companies have looked to decrease their reliance on US suppliers, hoping to offset the damage should they too be targeted by US trade-war policies. Xiaomi, for example, was added to a US blacklist less than a week ago, in one of the final moves of the Trump administration.
Of course, the US sanctions against Huawei and China do not tell the full story here; Qualcomm is facing increasing competition in this region from the likes of MediaTek, which grew substantially in market share in the second half of 2020, rising from 17.9% in the first half of the year to 31.7% in the second half. In doing so, MediaTek became the largest smartphone processor manufacturer in China’s domestic market for the first time.
Apple, interestingly, also showed steady growth, rising from 9.4% in H2 2019, to 13.6% in H2 2020.
The CINNO report suggests that this decline in Qualcomm’s presence in the market marks the start of a new, more competitive era, coinciding with the rollout of 5G. When it came to 4G, Qualcomm was the dominant force in the Chinese semiconductor market, but the upcoming 5G era appears to be leading to a more tripartite contest between Qualcomm, Mediatek and HiSilicon. While the latter will certainly continue to struggle directly from US sanctions, and Qualcomm will presumably regain some of its lost market share with the launch of its new 6 and 4 series 5G chipset, it is clear that 2021 will see a long-term reshaping of the smartphone chip market in China.
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