Huawei Phone Prices Rise in China on Fears of Chip Shortage

Chinese consumers are rushing to buy smartphones from Huawei featuring its high-end Kirin chips, fearing curbs on the firm's access to US technology will soon cut off production of its premium handsets.

Phone vendors in Huaqiangbei, the world's largest electronics market located in the southern city of Shenzhen, said prices for new and used Huawei phones had risen steadily over the past month, by around CNY 400 (roughly Rs. 4,400) to CNY 500 (roughly Rs. 5,400) on average. The Porsche design model of Huawei's flagship Mate 30 was selling for CNY 14,000 (roughly Rs.1,52,200), from CNY 10,000 (roughly Rs. 1,08,740) in January, one vendor said. The phone was available at a similar price on online marketplace Taobao.

Consumers are increasingly worried over the supply of components for newer handsets, said one vendor.

"The Huawei phones are getting expensive but that's supply and demand," said the vendor, who gave her name as Xiao. "If people like the brand, they'll pay more, and who knows how good the chips they'll have in the future will be?"

The US government last year moved to prevent most US companies from conducting business with Huawei, saying the world's biggest maker of mobile telecommunications equipment and smartphones was ultimately answerable to the Chinese government. Huawei has repeatedly denied being a national security risk.

Last month, the United States further tightened restrictions to choke its access to commercially available chips, prompting Taiwan Semiconductor Manufacturing (TSMC) to stop shipping wafers to Huawei.

Richard Yu, chief executive of Huawei's consumer business, subsequently said the company will stop making its Kirin chips on September 15 because of US measures to cut off its chipmaking unit HiSilicon from vital technology.

HiSilicon relies on software from US firms such as Cadence or Synopsys to design its chips, and outsources production to TSMC, which uses US-made equipment.

Wholesale traders at the market said they had been busy for the last month meeting extra demand for online sales, with prices of higher-end phones rising every few hours. They were uncertain how much supply remained at distributors.

Huawei does not disclose inventory information. A spokesman told Reuters the firm continues to operate according to demand.

It likely has chip inventory to last through the first half of next year, said analyst Will Wong at consultancy IDC.

"One option for them to have Kirin chips last longer is to ship less for the rest of the year," Wong said.

Last week, Huawei said it planned to introduce its Harmony operating system on smartphones next year, in part to overcome US limits on its access to Alphabet's Android.

Yet analyst Mo Jia at Canalys said launching Harmony would only be a "symbolic innovation" if Huawei no longer had the chip supplies to make high-end phones.

© Thomson Reuters 2020

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