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Huawei starts stacking chips in global game of technology roulette

For major players in the high-stakes game of technology roulette, the only global currency is chips. Beautiful byte-sized semiconductors.

Earlier this week, telecom titan Huawei decided to spin the wheel when it rolled out the Kunpeng 920 processor by using cutting-edge “DNA” from industry leader ARM.

In a nano-second, the poster child of the “Made in China 2025” policy underlined its ambitions with a chip to run the group’s TaiShan big data servers, which will boost its cloud computing operation.

“The Kunpeng 920 is a major enabler for Huawei’s own server product portfolio. Since it will never be sold as a stand-alone product, there is no impact to Intel’s server x86,” Earl Lum, the founder and president of EJL Wireless Research in California, told Asia Times.

“But I note that the Huawei solution is ARM-based. If they were to sell this as a stand-alone product, then it would be a major competitor to Intel. Huawei has been making significant strides on their ASICs [application-specific integrated circuits] for telecom wireless systems for more than five years,” he added.

Working with Huawei’s subsidiary HiSilicon, the chip will be made by TSMC, or the Taiwan Semiconductor Manufacturing Company, one of the global leaders. But at the heart of the processor will be the licensed blueprint from ARM.

Owned by Japanese multinational conglomerate SoftBank, the innovative British chip designer has a cast list of stellar clients, which include Apple, Samsung and Qualcomm.

“ARM Holdings doesn’t build processors per se,” Jason Perlow, a technical architect consultant at Dimension Data, told ZDNet, a business technology news website published by CBS Interactive and TechRepublic.

“It creates reference designs or ‘architectures’ which are essentially the basic blueprints, or the ‘DNA,’ of how semiconductors work,” he added. “[The firm] then licenses those basic designs to other companies, which in turn use them in their own chips.”

ARM’s influence in the industry has become immense since it was founded in 1990 with its corporate customers selling a massive 130 billion processors.

Last year, the firm set up a joint venture in Shenzhen’s high-tech hub, which is home to Huawei. Known as “Mini ARM,” the holding company announced in July that it was planning to cede control to a Chinese consortium, spearheaded by the Hou An Innovation Fund.

Other key investors are believed to be Baidu, which is China’s answer to Google, Bank of China Group Investment and venture capital firm Sequoia.

Relationship

Huawei’s link to ARM has raised questions about its relationship with Intel, the giant Silicon Valley chipmaker. But those were dispelled this week.

“Huawei has invested patiently and intensively in computing innovation to continuously make breakthroughs,” William Xu, the chief strategy marketing officer, said in a statement. “Huawei and Intel will continue our long-term strategic partnerships and continue to innovate together.”

Still, this comes at a time when relations between China and the United States are strained, despite the trade war truce and the renewed emphasis on peace talks.

Technology has become a key battleground in the rivalry between the world’s two largest economies and Huawei has been caught in the crossfire.

Allegations that the company violated sanctions imposed on Iran by Washington led to the arrest last month of Meng Wanzhou, the chief financial officer and the daughter of the founder, Ren Zhengfei.

As the case drags on, she could face extradition to the US.

On Friday, another executive was arrested. This time it involved espionage allegations in Poland. But unlike the Meng saga, authorities revealed that the investigation was limited to employee Wang Weijing and not the company.

To add to the spate of negative news, there has also been intense scrutiny about cybersecurity and Huawei’s perceived links to China’s government with countries such as Australia, New Zealand, Japan and the United Kingdom restricting market access.

These accusations have been denied by the company.

“Huawei has no connection to the cyber-security issues the US has encountered in the past, current, and future,” Ren, now 74, told the Chinese media in a rare interview.

Yet the allegations persist.

Part of the reason is the sheer depth of the “Made in China 2025” program, which was singled out by US President Donald Trump during the opening salvos of the trade war because of state subsidies.

Arms race

This, in turn, has triggered a technological arms race. In response, President Xi Jinping’s administration has called on the industry to become “self-sufficient” in key components such as semiconductor production.

China’s reliance on US high-tech was exposed earlier this year when ZTE, another telecom mega company, was denied access to crucial components for breaking a sanction-busting agreement.

Left crippled, the group nearly folded before a deal was hammered out.

Moreover, the ramifications were not lost on Beijing as it pushed ahead with the “Made in China 2025” plan, which encompasses an array of industries, including the Internet of Things and interconnected smart technology linked through artificial intelligence or AI.

All of them will be juiced up by semiconductors and powered by companies such as Huawei, which is recognized as China’s flagship group when it comes to digital infrastructure and consumer hardware like smartphones and laptops.

The rollout of high-speed 5G networks across the country is another major opportunity. So is the grandiose Belt and Road Initiative, which has become an extension of Xi’s global ambitions and the centerpiece of his economic foreign policy.

These ‘New Silk Road’ superhighways will connect China with 68 countries and 4.4 billion people across Asia, Africa, the Middle East, and Europe in a maze of multi-trillion-dollar infrastructure projects, including a web of digital links.

Indeed, it is this part of Huawei’s business which has caused anxiety in the US and among its allies.

“Do we have to be worried about Huawei and other Chinese companies? Yes, I think we have to be worried,” Andrus Ansip, the European Union’s vice-president for a digital single market, told the Associated Press when asked about cybersecurity.

Welcome to the global game of technology roulette.