Beneficiary of US-China Trade War

Intel’s decision to put a halt to its cooperation on 5G modem chips with Tsinghua Unic Group in China is good news to Samsung Electronics’ foundry business.
Intel’s decision to put a halt to its cooperation on 5G modem chips with Tsinghua Unic Group in China is good news to Samsung Electronics’ foundry business.

Intel put a halt to its cooperation on 5G modem chips with Tsinghua Unic Group in China as the US-China trade dispute has been escalating to a technology war over 5G mobile telecommunications. The cooperation was put on hold in less than one year since the partnership was announced at the Mobile World Congress (MWC) in 2018. As for Samsung Electronics targeting the 5G market, in particular, smartphones, semiconductors and telecom equipment, it was positive news as a potential competitor hit a snag in its rising process.

Intel and Spingtrum, a subsidiary of Tsinghua Unigroup, have decided to discontinue their cooperation in 5G modem chip development, said foreign news media outlets including Nikkei Asian Review on Feb. 28. The two companies publicly said that they agreed on the matter. But some semiconductor industry analysts said that Intel made the decision by taking the Trump administration into consideration.

"Intel has been concerned about a possibility that it will annoy the US government for the US chip giant to have a close relationship with a Chinese company backed by the Chinese government in the midst of the US-China trade conflict," the Nikkei Asian Review quoted an anonymous official as saying. In 2014, Intel bought a 20-percent equity in Tsinghua Unigroup for US$1.5 billion (about 1.7 trillion won) in. For this reason, Tsinghua Unigroup was said to be free from the US-China trade dispute. But finally, Tsinghua Unigroup failed to avoid the aftermaths of the US-China trade war.

Spreadtrum will continue to develop its own 5G modem chip and release it within this year. However, "This decision is fatal to Spreadtrum rather than Intel," said a researcher in Chinese market research firm CINNO. “Intel can partner with other Chinese corporate customers to enter the Chinese market but Spreadtrum missed a big chance to learn from Intel."

Semiconductor industry analysts say that China is facing an uphill battle in the promotion of its semiconductor industry. The United States has already imposed restrictions on the export of American equipment, parts and technologies to Chinese chipmaker Fujian Jinhua, thereby virtually put the company out of business. The US also started to keep China in check with respect to 5G modem chips which are system semiconductors.

Qualcomm, Samsung Electronics, Huawei, Intel, and MediaTek are the only companies that came up with 5G modem chips. However, except for Samsung Electronics and Huawei, both of which use 5G chips of their own development, most smartphone makers have adopted Qualcomm's 5G chips. This means that latecomers Intel and Spreadtrum have little impact on Samsung Electronics.

However, this indicates that a potential competitor was eliminated in the situation where the 5G market has just begun. The decision will enable Samsung to compete with Qualcomm and Huawei on an equal footing in the Chinese market. An antitrust case between Apple and Qualcomm revealed that Samsung Electronics' 5G modem chip was technologically advanced so that Apple considered using Samsung’s 5G modems in the iPhone in addition to those of MediaTek and Intel."

The decision is good news to Samsung Electronics’ foundry business division which produces 5G mobile chips of both Qualcomm and Samsung Electronics. The more products loaded with 5G chips from both companies are sold, the higher sales of the foundry division will soar. Both Samsung’s and Qualcomm's 5G modem chips will be produced by Samsung Electronics’s foundry business division via a 7-nm process, while Huawei chips will be produced by TSMC in Taiwan.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution