Huawei has scaled back the production of the Mate 60 series flagship smartphones. No, the demand hasn’t dwindled. The phones are selling well, crossing 30 million shipments within five months of launch. This is a healthy sales pace for a company beleaguered by various US sanctions. However, the sanctions mean it has limited resources and has to slow down smartphone production to prioritize AI chips.
Huawei is focusing on AI chips at the expense of Mate 60 smartphones
Huawei reportedly uses the same production facility to manufacture its Ascend AI chips and Kirin processors that power the Mate 60 smartphones. According to a Reuters report, which cites three people familiar with the matter, the company is struggling with low yield rates at this semiconductor facility. Yield rate is the percentage of the usable chips produced to the total number of chips that can be made from one wafer.
The sources didn’t provide a precise number but it appears the Chinese firm’s yield rate is poor. Effectively, its chip production capacity is low. As the tech industry rushes to incorporate AI into just about every product, Huawei has decided to scale back the production of Kirin chips for the Mate 60 series, prioritizing AI chips. It will allocate the bulk of its resources to produce the Ascend 910B and other AI chips.
This is a massive decision from Huawei. As said earlier, the Mate 60 series has been selling well in China. The phones helped the firm outsell Apple iPhones in the domestic market last year. They have set the tone for Huawei to achieve its target of doubling its smartphone sales in 2024. It aims to ship 60-70 million smartphones this year. However, unless it improves its chip yield rates soon, the firm might struggle to hit the target.
As far as the decision to prioritize AI chips is concerned, Huawei knows that the US trade restrictions have limited Chinese companies’ access to advanced AI chips like Nvidia’s H100. As the AI trend grows, the demand for domestic solutions will rise. It is looking to tap into the opportunity with early inroads. As Reuters states, “The Ascend 910B is widely considered the most competitive non-Nvidia AI chip available in China.”
This might be a short-term production arrangement
Huawei hopes this production arrangement to be a short-term one. It is reportedly working on improving its yield rates, so it could simultaneously produce the desired amount of Kirin processors and Ascend AI chips at its semiconductor facility. Whether it manages to make that happen anytime soon, time will tell. The firm declined Reuters’ request for a comment on the matter.
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