Closing Oppo’s Chip Design Unit Won’t Influence The Country’s Overall Aspirations To Attain Technological Independence.
As the company deals with uncertainties from the global economy and the mobile phone industry, OPPO decided to stop Zeku's operation after carefully analysing the market conditions.
In light of growing uncertainty in the global economy and the smartphone business, China’s top smartphone manufacturer OPPO will close its chip design division Zeku, the company stated recently. Although the case is a symptom of the difficulties Chinese chip makers confront, industry observers claim that OPPO’s decision to shut down its chip design division is unlikely to harm the nation’s broader semiconductor industry.
According to publicly available information provided by the company, OPPO established the wholly-owned chip design subsidiary in 2019 with about 3,000 employees, covering businesses such as the research, development, production, and sales of semiconductors. The product lines range from entry-level application processors to 5G modems, among other products.
According to a report by Chinese news websites, OPPO declared through an internal letter that it would terminate all Zeku employee contracts. The laid-off employees will have access to compensation. Sources informed that other businesses had created routes to rehire Zeku staff.
As the company deals with uncertainties from the global economy and the mobile phone industry, OPPO decided to stop Zeku’s operation after carefully analysing the market conditions. It added that it would handle related issues accordingly and continue to produce high-quality products and add value as usual.
Difficulties that persist.
The MariSilicon X product, a first-ever self-designed imaging neural processing unit developed on 6-nm process technology and utilised in some of OPPO’s top phone models, was introduced in 2021. Its goal was to enhance pictures for video and photography recorded on smartphones. However, a report by industry analyst ICwise, located in Shanghai, states that creating a chip and a chip’s actual introduction into the market are two distinct scenarios, with additional labour, operational, and investment expenditures to be included.
Analysts stated that OPPO significantly invested in Zeku, but it has yet to reach mass production due to a generally slow industry environment. They also noted that since OPPO primarily earns money from the sale of phones, the recent decline in market demand for smartphones makes it more challenging to sustain significant investment.
According to a report from the Chinese news website, OPPO announced in 2020 that it would spend 50 billion yuan ($7.19 billion) over the next three years on technology research and development (R&D), including chip design and production. As a result, the company’s R&D investment in 2019 increased to 10 billion yuan from less than 4 billion yuan in 2018.
As per industrial statistics, the number of smartphones shipped globally in 2022 was 1.21 billion, an 11.3 per cent reduction from the previous year. OPPO shipped 100 million sets in 2022, a 22.7 per cent decrease from the last year and 8.6 per cent of the worldwide market.
Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, said that OPPO, as a smartphone manufacturer, typically purchases chips from the market or invests in its own chip companies, a relatively mature business model. He added that using self-made chips might result in risks associated with market fluctuations. OPPO decided to cancel Zeku due to the US’ irresponsible attempt to put tight limitations on technology sales to China in an effort to rein in China’s economic progress.
Geopolitical pressures must not be ignored, ICwise added. The 6-nm process technology from TSMC was previously used in Zeku’s two prior chips, and the company’s upcoming phone processor is purportedly going to use TSMC‘s 4-nm technology, which is now prohibited by the US government.
A necessary change for OPPO.
Despite the challenges, industry analysts remain optimistic about the future growth of China’s semiconductor business due to the nation’s distinct advantages, human resource strength, and strong government backing. According to Xiang, the closure of a semiconductor company is not a sign of significant difficulty for the Chinese chip industry but rather a necessary step in industrial transformation, optimisation, and consolidation. The sector has entered a phase of rapid change as Chinese businesses adjust, merge, and consolidate to create more robust clusters that produce higher-quality goods.
Ma Jihua, a seasoned technology analyst, said that China has seen significant money flow to the growth of the chip business, which experts say is essential to push the industry to accomplish more extraordinary qualitative advances in the coming months.
China invested 1.5 trillion yuan on projects linked to semiconductors in 2022, according to data from the Chinese analytical firm CINNO Research, which significantly strengthens the country’s independence and capacity in the semiconductor industry.
According to Xiang, the number of semiconductor businesses in China increased from thousands to tens of thousands due to heavy investment in the industry, showing that skill and technology are in short supply rather than cash.
The semiconductor industry, from designing to manufacturing to packaging, has been a hot investment option since 2018, even during the COVID-19 pandemic, according to a Shenzhen-based venture capital firm. The company is anticipating semiconductor firms in Shanghai, Nanjing, Shenzhen, and other cities making good progress over the past two years.
According to Ma, China’s capacity to manufacture goods at a higher level than any other country in the world, together with the advancement of semiconductor equipment and talent nurturing, are key factors supporting the industry’s continued growth.
Ma said the chip industry will undergo a turnaround after the introduction of new materials and new technologies, using China’s automobile industry as an example. China’s electric vehicle industry has advanced significantly thanks to the vigorous development of electric batteries, whereas the country was previously unable to overcome the bottleneck of internal combustion engines.
Chinese provinces and cities have been taking calculated actions to assist the growth of regional chip businesses. For instance, Shanghai announced that it would offer grants of up to 100 million yuan in April to promote qualified projects involving high-end software, semiconductor manufacturing equipment, and materials.
Proofread & Published By Naveenika Chauhan
