Huawei Phone Prices Rise in China amid Chip Shortage

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French head office of Huawei Technologies

Chinese consumers are rushing to buy smartphones from Huawei Technologies Co Ltd featuring its high-end Kirin chips. Buyers fear curbs on the firm’s access to U.S. technology will soon cut off production of its premium handsets.

Huaqiangbei is the world’s largest electronics market located in the southern city of Shenzhen. Phone vendors in Huaqiangbei said prices for new and used Huawei phones had risen steadily in August. Prices rose by around 400 to 500 yuan on average.

One vendor said, the Porsche design model of Huawei’s flagship Mate 30 sold for 14,000 yuan ($2,067).  That was an increase from 10,000 yuan in January. The phone was available at the same price on online marketplace Taobao.

Xiao, a vendor, said, consumers in China are increasingly worried over the supply of components for newer handsets.The Huawei phones are getting expensive but that’s supply and demand, she said.

If people like the brand, they’ll pay more. And who knows how good the chips they’ll have in the future will be, Xiao added.

Last year, the U.S. government moved to prevent most U.S. companies from conducting business with Huawei. It said the world’s biggest maker of mobile telecommunications equipment and smartphones was ultimately answerable to the Chinese government. Huawei, however, has repeatedly denied being a national security risk.

In August, the United States further tightened restrictions to choke its access to commercially available chips. This prompted Taiwan Semiconductor Manufacturing Co Ltd to stop shipping wafers to Huawei.

The Harmony Operating System on Smartphones

Computer keyboard and cell phone with the Huawei logo.

Richard Yu, chief executive of Huawei’s consumer business, later said they will stop making its Kirin chips on Sept. 15. This is because of U.S. measures to cut off its chipmaking unit HiSilicon from vital technology.

HiSilicon relies on software from U.S. firms including Cadence Design Systems Inc or Synopsys Inc to design its chips. It outsources production to TSMC, which uses U.S.-made equipment.

Wholesale traders at the market had been busy in August meeting extra demand for online sales. Prices of higher-end phones were rising every few hours, uncertain how much supply remained with distributors.

Huawei does not disclose inventory information and it continues to operate according to demand.

Analyst Will Wong at consultancy IDC said it likely has chip inventory to last through the first half of 2021. One option for them to have Kirin chips last longer is to ship less for the rest of the year. 

The firm said last week it planned to introduce its Harmony operating system on smartphones next year. This is in part to overcome U.S. limits on its access to Alphabet Inc’s (O:GOOGL) Android.

Analyst Mo Jia at Canalys said launching Harmony would only be a symbolic innovation. That is, if Huawei no longer had the chip supplies to make high-end phones, Jia added.

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