For years, Huawei has been developing its own high-powered processors and modems, all to power its big portfolio of mobile devices. And so far, the company has almost completely refused to sell any of those to its competitors. We've learned, however, that the company might be softening that stance. A source with knowledge of the situation has confirmed to Engadget that Huawei is now "open" to selling its 5G Balong 5000 chipsets, but only to one company: Apple.
Such a deal would be unusual, to say the least. Chip sales aren't exactly Huawei's forte, and a company representative said earlier this year in China that Huawei "Balong is mainly for supporting Huawei's smart products, such as phones and IoT products, and is currently for Huawei's internal use only."
For Huawei — a company that's gunning to become the world's largest smartphone maker in 2020 — offering 5G as an olive branch to one of its biggest rivals is surprising. At this point, though, it's unclear whether the companies have engaged in any conversations — neither Huawei nor Apple has responded to requests for comment at time of publication.
Huawei's surprising change of heart only really matters because Apple appears to be in a tough spot with its sole modem supplier, Intel. The chipmaker provides the wireless modems that go into all iPhones and iPads, and it said late last year that its 5G-ready XMM 8160 modems would be available for its customers in the second half of 2019.
A recent report from Fast Company, however, cites an anonymous source who claims that Apple has "lost confidence" in Intel after the chipmaker failed to meet certain development deadlines. (When asked for comment, an Intel spokesperson simply said the company "plans to support customer-device launches in 2020 with its XMM 8160 5G multimode modem.")
That sentiment was echoed in a research note written by UBS analyst Timothy Arcuri last week — based on "field work," Arcuri said UBS does not "believe [Intel] will be ready with a single chip backward compatible 5G modem" and that Apple was "increasingly in jeopardy of being unable to ship a 5G iPhone in 2020."
Meanwhile, Apple's protracted legal battles with Qualcomm continue to make murky the possibility of a future 5G partnership. The jury in the Qualcomm-Apple case decided earlier this month that Apple owes Qualcomm $31 million for three counts of patent infringement, and the two companies are set to re-enter the courtroom April 15 in a billion-dollar battle over royalty payments. It's possible that Apple and Qualcomm could bury the hatchet and work together in the future, but it's unclear whether they could sort everything out in time to produce a 5G iPhone for 2020.
Coincidentally, a separate FTC-Qualcomm lawsuit also provided clear confirmation that Apple was open to working with different modem makers as it began charting out its path to 5G. Apple supply-chain executive Tony Blevins said in his testimony that the company had looked into 5G chipsets produced by Samsung and Mediatek as part of an initiative called "Project Antique" because it didn't want to rely on a single vendor.
"The entire concept of Project Antique was to find a second supplier," Blevins testified. "No offense to [Intel] but we don't want to be single-supplier with them." Unfortunately, there are questions as to whether it would make sense for Apple to use modems from these outside suppliers, as UBS analyst Arcuri pointed out in his research note.
"Samsung/Mediatek are unlikely [5G] solutions either technically (Mediatek) or practically (Samsung)," he said.
Clearly, Apple is keeping an open mind about what modems it could use, and Huawei is open to the idea of a deal. It doesn't hurt that Huawei representatives at this year's Mobile World Congress indicated that the Balong 5000 is "already available," citing its use in devices like the Mate 20X and the foldable Mate X that will launch this summer as proof. And on the surface, at least, the Balong 5000 seems like the kind of chip Apple would need: It supports both sub-6 and mmWave 5G networks, and is backward compatible with 2G, 3G and 4G LTE networks. This would give Apple the ability to build an iPhone that would support 5G networks built off of existing 4G infrastructure, as well as the "standalone" 5G networks that will follow.
If Intel no longer has Apple's trust, Qualcomm isn't an option yet, and Samsung and Mediatek aren't practical either, Huawei's offer of openness could provide Apple with the components it needs to get a 5G iPhone out in 2020. But could such a deal with Huawei ever actually come together? Based on optical and political considerations, we're inclined to say "probably not." Even so, it isn't hard to see how a working relationship between Huawei and Apple could benefit both companies to some extent.
Broadly speaking, Huawei would gain a lucrative, high-profile customer and open up a totally new revenue stream for itself. And while a 2020 release still wouldn't be certain, having a chipset ready to integrate and test sooner would give Apple more time to work on its 5G iPhone in earnest.
Beyond that, though, a tie-up with Huawei could help how Apple is perceived in one of its most important markets. Earlier this year, Apple CEO Tim Cook stunned media and the markets by revising Apple's iPhone sales guidance down, specifically as a result of a sales slowdown in China. The image of Apple teaming up with Huawei — a political and economic heavyweight in China — would demonstrate that Apple is serious about courting the market's rising consumer class. And were Apple to work with Huawei on a 5G iPhone, it would almost certainly enjoy compatibility with the standalone 5G networks China plans to light up over the next few years.
While a potential Apple-Huawei relationship could prove fruitful, there are, obviously, plenty of reasons why Apple would want to steer clear of a deal like this.
For one, recent reports allege that Huawei targeted has Apple employees and supply chain partners on multiple occasions in a bid to crack the Cupertino company's trade secrets. In one such scenario, Huawei reportedly misled a supplier with news of a potentially lucrative contract in order to learn more about the Apple Watch's heart rate sensor. And beyond that, The Information reported that a former Apple employee who interviewed for a new job at Huawei said it seemed the company was more interested in what they could learn about Apple than in that person as an actual applicant.
There's also little question that Huawei has drawn significant inspiration from Apple when it comes to product design. Though they have garnered generally positive reviews, Huawei's MateBook series of laptops look nearly identical to some of Apple's computers — it can be hard to imagine that Apple would ever want a working relationship with such a blatant copycat.
And then, of course, there are more urgent concerns: the US government has banned use of Huawei equipment by federal agencies and has been campaigning around the world for friendly governments to do the same. Meanwhile, Huawei is suing the United States over that ban and is also dealing with two other lawsuits pertaining to theft of trade secrets, bank fraud and violating trade sanctions in Iran (Huawei has pleaded not guilty to all charges.)
By entering into a deal with Huawei — even if the devices that result from it were only sold in China — Apple could quickly find itself in a difficult situation with the US government. Considering the tenuous relationship that already exists between Apple and the Trump administration, publicly aligning with Huawei might be the last thing Tim Cook would want to do.