December 03, 2021
I've had a lot of fun in Hawaii, but it's time to come home. I'll be coming at you from SF starting on Monday. Today's newsletters is 1,138 words or a 4-minute read.
1 big thing: How Huawei sanctions snarled supply chains
The largely successful U.S. effort to hobble China's Huawei has benefitted a host of other tech companies — from smartphone makers such as Apple and Xiaomi to chipmakers like Qualcomm.
Yes, but: The massive disruption to the industry furthered an industry-wide mismatch between supply and demand, exacerbating the global chip shortage.
International sanctions on Huawei, promoted by the U.S., had a two-fold effect, according to Neil Shah, a partner at market analysis firm Counterpoint Research.
- "Firstly, Huawei sucked in most of the components supply to help its smartphone business survive for the next twelve months," Shah said.
- That, in turn, pushed mobile competitors to race to book orders even though the overall smartphone market has been relatively flat.
- And that left other industries, such as automotive, unable to secure needed chips when their business rebounded.
Catch up quick: U.S. efforts to limit Huawei's business began years ago, but accelerated during the Trump Administration. Before then, efforts against the firm — whose close relationship to China's government, U.S. policymakers believe, makes it a security threat — largely centered on keeping Huawei out of major American telecom networks.
- Huawei's cellphone business was further decimated by a ban that kept it from getting key components, such as software and chips, from U.S. companies.
The big picture: The result of the moves was a collapse of Huawei's market share in phones, even in China.
- The company, which had been selling 50 million phones per quarter and was a leader in China and Europe, saw its sales drop to 7 million per quarter globally by the third quarter of this year, according to Counterpoint Research.
- Huawei’s global market share plunged from a peak of 17% in March 2020 to just 2% in September, per Counterpoint.
Between the lines: The resulting shake-up benefitted nearly everyone else in the market.
- In phones, Chinese device maker Xiaomi was a big winner, gaining not just in China, but also scooping up a large chunk of Huawei's business in Europe, where Huawei had been a key premium brand.
- Huawei's rapid decline in the high end of the phone market largely benefitted Qualcomm, while Taiwanese chipmaker MediaTek scooped up even more of the low-end phone market.
- In networking gear, arguably Huawei's most important business, the company remains a significant player. But its losses in Europe and other advanced markets helped bolster rivals Ericsson and Nokia.
The other side: Huawei remains a giant company. Even with sales down by nearly a third, the company still posted revenue of 455.8 billion yuan ($71.5 billion) for the first nine months of 2021.
- In a statement to Axios, Huawei acknowledged that its business has been "significantly disrupted" by U.S. sanctions, which it also said "contributed to the overall difficulties and eventual shortages in supply chains involving chipsets."
2. FTC disputes Nvidia buying Arm
The Federal Trade Commission on Thursday sued to block the chip supplier Nvidia's $40 billion acquisition of U.K. chip designer Arm. The agency argues the deal would give Nvidia too much control over the technology and designs its competitors rely on, Axios' Margaret Harding McGill reports.
Why it matters: Arm's chip designs are used in phones, tablets, game consoles and by companies including Apple, Samsung and Qualcomm.
Driving the news: The complaint from the FTC, approved unanimously and announced on Thursday, argues that because Arm's designs are a critical input that enables competition between Nvidia and its rivals, the deal would give Nvidia the ability to undermine its competitors.
- Specifically, the FTC says the deal would hurt competition in three markets in which Nvidia competes: advanced driver assistance systems, networking products and cloud computing.
What they're saying: "The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” FTC Bureau of Competition director Holly Vedova said in a statement.
The other side: Nvidia said it would keep Arm's open licensing model when the deal was announced.
- "As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition," an Nvidia spokesperson said in a statement.
3. UN: 63% of the world uses the internet
The percentage of the global population using the internet surged from 54% to 63% between 2019 and 2021, according to the UN's International Telecommunication Union. That means hundreds of millions of people logged on for the first time during the pandemic, as Axios World's David Lawler reports.
Breaking it down: Perhaps unsurprisingly, there's a big divide globally between residents of urban (76%) and rural (39%) areas. 15- to 24-year-olds (71%) are also more likely to use the internet than older people (57%).
- Africa (33%) is far behind. Internet usage is at least 60% in every other region.
- Mobile broadband is the main source of internet access in the developing world, and 4G networks now reach 88% of the world's population. Still, 390 million people aren't covered even by 2G.
Yes, but: More countries are interrupting or censoring the internet that their citizens access.
4. DiDi to delist from NYSE
Chinese ride-hail giant DiDi said it will delist from the New York Stock Exchange, following a Chinese government crackdown on foreign listings, Axios' Hope King and Dan Primack report.
Why it matters: This reflects how geopolitical tensions are bleeding into the capital markets.
Backstory: DiDi isn't just the Uber of China. It's the company that beat Uber in China, buying up the U.S. company's business before going public this past June at a $73 billion valuation.
- What wasn't known at the time was that Chinese officials had asked DiDi to postpone the IPO over concerns that sensitive data could fall into foreign hands.
- Just days after its stock began trading, China banned DiDi from app stores. Last week, Bloomberg reported that Chinese officials recently asked the company to devise plans to delist from the U.S.
What's next: The company said in a Weibo post that it plans to relist its shares in Hong Kong. A spokesperson for the NYSE didn't return a request for comment.
5. Take note
- I am spending my last full day here touring a coffee plantation and seeing some black sand beaches before heading to Volcanoes National Park. But if AJ asks, I was working so hard I barely left my hotel room.
- Lyft said CFO Brian Roberts is stepping down, to be replaced on Jan. 3 by Amazon Studios CFO Elaine Paul. Before joining Amazon, Paul was CFO of Hulu and spent nearly two decades at Disney.
- Fitness tech company Tonal hired Amy Ard as chief financial officer and former Google HR executive Martin Tracey as chief people officer.