Clone Phones
Huawei’s (pvt) smartphone business has been severely disrupted by the US trade restriction placed on the company that do not allow US companies or foreign companies that use US products to sell to Huawei. This has limited Huawei’s smartphone business to China and stifled its ability to produce 5G smartphones for its customers. While Huawei has developed its own flavor of Android, its smartphone customers are also unable to access the Google (GOOG) Play Store, which means they are unable to access many Android applications and updates and without the advanced node 5G chips produced by Samsung and Taiwan Semi (TSM), their phones are limited to 4G..
As a result Huawei’s share of the smartphone market has declined from 19.36% in 2Q 2020 to 1.8% in 1Q this year, with little hope that such sanctions will be lifted in the near-term, and while local semiconductor fabs are able to produce more mature node chips, they are also prohibited from purchasing much of the advanced lithography tools needed for nodes below 28nm. Huawei went as far as to sell its Honor (pvt) smartphone brand division to investors in order to separate it from the US restrictions although the company has no interest in Honor at this time. Given the tight rein the US restrictions place on Huawei, the company has transitioned into businesses that are not based on advanced node semiconductors, but has not given up on the smartphone business despite the lack of consumer traction.
It seems that Huawei is able to provide 5G service for its customers if they purchase a mobile phone case that is made by a 3rd party that is not affiliated with Huawei and therefore is able to purchase 5G modem components. While the case offers some protection for the phone, the real purpose is to give 5G service to Huawei smartphones. But things go further as a company known as TD Technology (pvt), an affiliate of TD Tech Holdings (pvt) which is jointly owned by Huawei and Nokia (NOK), sells a smartphone known as the TD Tech M40, strangely similar to the Huawei Mate 40 series of 4G smartphones, but capable of 5G service, and we say strangely similar as TD Tech is a licensing partner of Huawei and has acknowledged that it purchases parts from the company. The Huawei P50 series, released last year has the same lack of 5G service but it seems a company known as Soyea Technology (000909.CH) has developed a “5G Communication Case” that is suitable for the Huawei P50 Pro, and can be purchased for ~$120.
Huawei has recently removed the Mate 40 smartphone line from availability, which many believe is in anticipation of the release of the Mate 50 expected this summer, which is already said to possibly include a ‘mobile phone case’ similar to the one mentioned above, allowing the phone to provide 5G service and stimulating Huawei’s smartphone sales, and while much of the Mate 50 story is speculation, expectations are that there will be a number of ‘cases’ available for the new Huawei smartphones as accessories. As TD Tech is a real company with over 1,800 employees they can obviously develop their own 5G smartphone line based on Huawei (licensed) technology, as they did with the Huawei clone mentioned above, but as it turns out, much of the TD Tech board is composed of Huawei executives and an undisclosed holding company beneficiary, which creates further suspicions that Huawei is even more closely tied to these ‘clone’ phones.
We wonder if the US DOD is up on these connections, as a possible workaround for Huawei’s smartphone business and whether TD Tech and Soyea will be added to the US entities list or will be allowed to provide help to Huawei’s smartphone business? We assume the answer depends on how stringent the DOD wants to be with Huawei and whether it is politically beneficial to tighten the screws on Chinese companies heading into the mid-term elections. If we know, we have to assume someone at the DOD knows that the Huawei clones are already here…
As a result Huawei’s share of the smartphone market has declined from 19.36% in 2Q 2020 to 1.8% in 1Q this year, with little hope that such sanctions will be lifted in the near-term, and while local semiconductor fabs are able to produce more mature node chips, they are also prohibited from purchasing much of the advanced lithography tools needed for nodes below 28nm. Huawei went as far as to sell its Honor (pvt) smartphone brand division to investors in order to separate it from the US restrictions although the company has no interest in Honor at this time. Given the tight rein the US restrictions place on Huawei, the company has transitioned into businesses that are not based on advanced node semiconductors, but has not given up on the smartphone business despite the lack of consumer traction.
It seems that Huawei is able to provide 5G service for its customers if they purchase a mobile phone case that is made by a 3rd party that is not affiliated with Huawei and therefore is able to purchase 5G modem components. While the case offers some protection for the phone, the real purpose is to give 5G service to Huawei smartphones. But things go further as a company known as TD Technology (pvt), an affiliate of TD Tech Holdings (pvt) which is jointly owned by Huawei and Nokia (NOK), sells a smartphone known as the TD Tech M40, strangely similar to the Huawei Mate 40 series of 4G smartphones, but capable of 5G service, and we say strangely similar as TD Tech is a licensing partner of Huawei and has acknowledged that it purchases parts from the company. The Huawei P50 series, released last year has the same lack of 5G service but it seems a company known as Soyea Technology (000909.CH) has developed a “5G Communication Case” that is suitable for the Huawei P50 Pro, and can be purchased for ~$120.
Huawei has recently removed the Mate 40 smartphone line from availability, which many believe is in anticipation of the release of the Mate 50 expected this summer, which is already said to possibly include a ‘mobile phone case’ similar to the one mentioned above, allowing the phone to provide 5G service and stimulating Huawei’s smartphone sales, and while much of the Mate 50 story is speculation, expectations are that there will be a number of ‘cases’ available for the new Huawei smartphones as accessories. As TD Tech is a real company with over 1,800 employees they can obviously develop their own 5G smartphone line based on Huawei (licensed) technology, as they did with the Huawei clone mentioned above, but as it turns out, much of the TD Tech board is composed of Huawei executives and an undisclosed holding company beneficiary, which creates further suspicions that Huawei is even more closely tied to these ‘clone’ phones.
We wonder if the US DOD is up on these connections, as a possible workaround for Huawei’s smartphone business and whether TD Tech and Soyea will be added to the US entities list or will be allowed to provide help to Huawei’s smartphone business? We assume the answer depends on how stringent the DOD wants to be with Huawei and whether it is politically beneficial to tighten the screws on Chinese companies heading into the mid-term elections. If we know, we have to assume someone at the DOD knows that the Huawei clones are already here…
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