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Huawei Said to Sell $15-Billion Honor Unit to Shenzhen Government, Digital China, Others



By Reuters | Updated: 10 November 2020

Huawei plans to sell budget-brand smartphone unit Honor in a CNY 100 billion (roughly Rs. 1,12,100 crores) deal to a consortium led by handset distributor Digital China and the government of its home town of Shenzhen, people with knowledge of the matter told Reuters.

The plan comes as US restrictions on supplying Huawei force the world’s second-biggest smartphone maker, after South Korea’s Samsung, to focus on high-end handsets and corporate-oriented business, the people said.

It also indicates little expectation for any swift change in the US perception of Huawei as a security risk following a change in US administration, one of the people said.

The all-cash sale will include almost all assets including brand, research & development capabilities and supply chain management, the people said. Huawei could announce it as early as Sunday, one of the people said.

Main Honor distributor Digital China will become a top-two shareholder of sold-off entity Honor Terminal with a near-15 percent stake, said two of the people. Honor Terminal was incorporated in April and is fully owned by Huawei, the corporate registry showed.

Digital China, which also partners Huawei in businesses such as cloud computing, plans to finance the bulk of the deal with bank loans, the two people said. It will be joined by at least three investment firms backed by the government of financial and technology hub Shenzhen, with each owning 10 percent to 15 percent, they said.

After the sale, Honor plans to retain most of its management team and 7,000-plus workforce and go public within three years, the people said, declining to be identified due to confidentiality constraints.

Honor declined to comment. Huawei, Digital China and the Shenzhen government did not immediately respond to requests for comment.


The US government last year moved to prevent most US companies from conducting business with Huawei, also the world’s biggest telecoms equipment vendor, citing national security concerns. Huawei has repeatedly denied being a security risk.

In May, Washington announced rules aimed at constricting Huawei’s ability to procure chips featuring US technology for use in fifth-generation (5G) telecommunications network equipment and smartphones such as its premium P and Mate series.

Huawei established Honor in 2013 but the business mostly operates independently. Divestment will mean Honor is no longer subject to Huawei’s US sanctions, analysts said.

Honor sells smartphones through its own websites and third-party retailers in China where it competes with Xiaomi, Oppo and in the market for lower-priced handsets. It also sells its phones in Southeast Asia and Europe.

Honor-brand smartphones made up 26 percent of the 51.7 million handsets Huawei shipped in July-September, showed estimates from researcher Canalys. Honor’s products also include laptops, tablet computers, smart TVs and electronic accessories.

With margins thin for lower-end phones, Honor booked about CNY 6 billion (roughly Rs. 6,700 crores) in net profit on revenue of around 90 billion yuan last year, said one of the people, citing audited figures.

© Thomson Reuters 2020

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Apple Says Global Chip Shortage Will Start to Affect iPhone Production, Growth Forecast Slows



By Reuters | Updated: 28 July 2021

Apple said on Tuesday that a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth, sending its shares lower.

Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4 percent growth rate in the just-ended third quarter. Growth will also slow in Apple’s closely watched services business, they said.

In a conference call with investors, Apple executives also said that while the impact of the chip shortage was less severe than feared in the third quarter, it will get worse in the fourth, extending to iPhone production.

Shares of Apple, whose valuation has more than doubled in about three years to nearly $2.5 trillion (roughly Rs. 1,85,89,882 crores), were down 1.7 percent to $144.24 (roughly Rs. 10,725) in after-hours trading after the call.

Earlier in the day, Apple reported third-quarter sales and profits that beat analyst expectations as consumers bought premium versions of its 5G iPhones and signed up for its subscription services. China sales grew 58 percent to $14.76 billion (roughly Rs. 1,09,754 crores) in the quarter, which ended June 26.

Driven by the better-than-expected iPhone sales, total revenue hit $81.43 billion (roughly Rs. 6,05,478 crores), above analyst expectations of $73.30 billion (roughly Rs. 5,45,085 crores), according to IBES data from Refinitiv. Apple’s profits were $21.74 billion (roughly Rs. 1,61,666 crores), or $1.30 (roughly Rs. 97) per share, above estimates of $1.01 (roughly Rs. 75) per share, according to Refinitiv.

During the investor call, Chief Executive Tim Cook said that chips affected by the shortages are made with older technology but are still needed as supporting parts to make the company’s flagship device, the iPhone.

“We do have some shortages,” Cook said, “where the demand has been so great and so beyond our own expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those.”

Cook declined to predict whether the shortages would last into Apple’s fiscal first quarter, when it typically sees its biggest iPhone sales. Angelo Zino, an analyst with research firm CFRA, said Apple could be stockpiling chips for its next generation of phones to the detriment of current models.

“Apple will want as many chips as it can get its hands on,” Zino said. “But when you couple that with the existing supply constraints, Apple is likely going to have a more difficult time meeting demand this year.”

Apple had told investors last quarter that the chip shortage could hold back sales by $3 billion (roughly Rs 22,309 crores) to $4 billion (roughly Rs. 29,748 crores).

In an interview on Tuesday, Cook told Reuters that the hit to overall revenue in the third quarter was “lower than the low end” of its previously forecasted range.

China, 5G

Apple’s strongest sales growth came from China, where Cook told Reuters that customers are buying up accessories such as the Apple Watch to pair with their iPhones.

“It wasn’t just iPhone. We set a new quarterly record for Mac, for wearables, home and accessories, and for services” in China, Cook said. “It was our strongest geography.”

Upgrading for 5G appeared to be driving a better buying cycle for iPhones than many analysts expected. Apple said iPhone sales were $39.57 billion (roughly Rs. 2,95,295 crores), up nearly 50 percent from a year earlier and above analyst expectations of $34 billion (roughly Rs. 2,52,885 crores).

Cook told Reuters that Apple’s iPhone 12 Pro and iPhone 12 Pro Max, the premium tier of the device, were strong sellers. That helped pushed gross margins to 43.3 percent, above estimates of 41.9 percent, according to Refinitiv.

On the conference call, he said 5G adoption is in its early stages of deployment in many countries around the world. Some analysts wondered whether that means the boom in 5G iPhone sales won’t last – consumers may buy a phone ahead of time and keep it until the service rolls out. Other analysts believe that means Apple can keep riding the boom.

“The low 5G penetration is a reminder that the best is yet to come for the company’s 5G iPhones,” said Tom Forte, an analyst at D.A. Davidson & Co.

The other major driver of Apple’s results was its services business, which includes paid subscriptions for television and music as well as its App Store. Services revenue reached a record high of $17.49 billion (roughly Rs. 1,30,073 crores), up by a third from a year earlier and above analyst expectations of $16.33 billion (roughly Rs. 1,21,446 crores). Cook told Reuters that Apple now has 700 million subscribers on its various platforms, up from 660 million a quarter earlier.

Chief Financial Officer Luca Maestri told investors that services growth will slow, however.

“We expect still-significant growth in services but not to the level that we’ve seen in June,” he said on the call.

Cook said Apple set quarterly sales records in many of its first-party services, including its AppleCare hardware insurance plans, which had slowed somewhat during the pandemic when many of the company’s retail locations were closed.

Sales of iPads and Macs were $7.37 billion (roughly Rs. 54,812 crores) and $8.24 billion (roughly Rs. 61,288 crores), compared with analyst expectations of $7.15 billion (roughly Rs. 53,181 crores) and $8.07 billion (roughly Rs. 60,024 crores), according to Refinitiv data.

© Thomson Reuters 2021

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Nokia Firmly Back in Global 5G Rollout Race After CEO Pekka Lundmark’s Shakeup: An Analysis



By Reuters | Updated: 27 July 2021

Shifting geopolitics and a sharp round of cost cutting have put Nokia firmly back in the global 5G rollout race just a year after CEO Pekka Lundmark took the reins at the Finnish company.

Considered a 5G underdog after betting on the wrong type of chips and losing a multi-billion Verizon contract to Samsung, Nokia has more recently been gaining ground on arch-rival Ericsson, even as both benefit from US pressure on European governments to crackdown on China’s Huawei.

Lundmark in February warned of a “challenging” year of transition with “meaningful headwinds”, but two good quarters have rekindled hopes of a turnaround and Nokia said earlier this month that it will raise its full-year outlook when it reports second-quarter results on Thursday.

“The drastic changes and improved performance under Pekka’s stewardship is clearly evident,” said Paolo Pescatore, an analyst at PP Foresight. “Opportunities in 5G, misfortunes of others and focus on key products have helped reignite the business.”

Lundmark, who became CEO last August, has laid off thousands of employees and forged new partnerships with technology companies after pledging to “do whatever it takes” to take the lead in 5G.

Nokia has also invested significantly in its Reefshark chipset, cutting the end cost of its 5G equipment, and given its business units more autonomy over where they choose to compete.

The right moves

As the overhaul bears fruit, the geopolitical backdrop has shifted further in Nokia’s favour.

European governments have long been tightening controls on the role of Chinese companies in 5G networks following diplomatic pressure from Washington, which alleges Huawei equipment could be used by Beijing for spying. Huawei has repeatedly denied being a national security risk.

While both Nokia and Ericsson have been gaining customers that might otherwise have gone to Huawei, Ericsson had been faring better with big contract wins in China, where the deployment of the next-generation network is in full swing.

But its China business has taken a tit-for-tat hit since Sweden late last year banned Chinese companies from supplying critical 5G network equipment.

In a second phase of 5G deployment by China Mobile last week, Ericsson’s 5G radio share dropped from over 11 percent to about 2 percent, and Nokia got its first Chinese 5G deal with a 4 percent share of a $6 billion (roughly Rs. 44,685) contract, according to sources.

It is also expected to win a portion of upcoming contracts from China Unicom and China Telecom at the expense of Ericsson, having failed to make any headway in the world’s biggest 5G market last year.

“The key was making the right moves to correct the actions that really got them behind 5G,” said Mark Cash, an analyst with Morningstar. “I think Pekka’s imprint is being felt already by the organisation, and he’s obviously doing well.”

Nokia’s shares have gained around 30 percent in the last year, while Ericsson’s are up just 2 percent over the same period.

Company insiders say Lundmark’s working relationship with Chairwoman Sari Baldauf helped steady the ship when several top executives left the company during a reshuffle in the first months of his tenure, and is gaining him wider support for the overhaul of Nokia.

The pair have a long history of working together, including most recently in the same roles at Fortum.

Geopolitical tussles

It may not all be plain sailing.

While Nokia, Ericsson and Huawei are currently the only companies providing complete 5G wireless networks, the US government for one is now touting a new, more open approach, allowing mobile operators to mix and match equipment from various suppliers and potentially securing US companies a bigger share of the market.

China, however, remains far ahead of other countries for 5G deployment – the China Mobile contract for about 500,000 base stations was for more than all the 5G base stations currently in Europe – with competition driving volume and lowering overall costs.

Nokia may swerve Ericsson’s current hurdles in the country as Huawei has said that a law approved by Finland allowing authorities to ban telecom equipment for national security reasons is a more realistic approach than focusing on specific vendors.

But some analysts caution that being in China could drag on Nokia’s margins and any new geopolitical tussles lead to significant losses.

Kimmo Stenvall, an analyst from OP Markets, also said that Nokia’s updated outlook would likely take into account the global chip shortage with not enough semiconductors to go around.

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Intel to Build Qualcomm Chips, Aims to Catch Foundry Rivals TSMC and Samsung by 2025



By Reuters | Updated: 27 July 2021

Intel said on Monday its factories will start building Qualcomm chips and laid out a roadmap to expand its new foundry business to catch rivals such as Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung by 2025.

Amazon will be another new customer for the foundry chip business, said Intel, which for decades held the lead in technology for manufacturing the smallest, fastest computing chips.

But Intel has lost that lead to TSMC and Samsung, whose manufacturing services have helped Intel’s rivals Advanced Micro Devices (AMD) and Nvidia produce chips that outperform Intel’s. AMD and Nvidia design chips which then are made by the rival chip manufacturers, called foundries.

Intel said on Monday it expects to regain its lead by 2025 and described five sets of chipmaking technologies it will roll out over the next four years.

The most advanced use Intel’s first new design in a decade for transistors, the tiny switches that translate to digital ones and zeros. Starting as early as 2025, it will also tap a new generation of machines from the Netherlands’ ASML that use what is called extreme ultraviolet lithography, which projects chip designs onto silicon somewhat like printing an old-fashioned photograph.

“We’re laying out a whole lot of details to The Street to hold us accountable,” Intel Chief Executive Pat Gelsinger told Reuters in an interview, referring to investors.

Intel also said it will change its naming scheme for chipmaking technology, using names like “Intel 7” that align with how TSMC and Samsung market competing technologies.

In the chip world where smaller is better, Intel previously used names that alluded to the size of features in “nanometers”. But over time the names used by chipmakers became arbitrary marking terms, said Dan Hutcheson, chief executive of VLSIresearch, an independent semiconductor forecasting firm. This, he said, gave the mistaken impression that Intel was less competitive.

Intel’s first major customers will be Qualcomm and Amazon. Qualcomm, which dominates chips for mobile phones, will use what Intel is calling its 20A chipmaking process, which will use new transistor technology to help reduce how much power the chip consumes.

Amazon, which is increasingly making its own data center chips for its Amazon Web Services is not yet using Intel’s chipmaking technology but will use Intel’s packaging technology, the process of assembling chips and “chiplets” or “tiles”, often stacking them up in so-called 3D formation. Intel excels in this packaging technology, analysts say.

“There have been many, many hours of deep and technical engagement with these first two customers, and many others,” Gelsinger said.

Intel did not give details how much revenue or manufacturing volume the customer wins would bring, though Gelsinger said during an event announcing the news that the Qualcomm deal involved a “major mobile platform” and engaging in a “deep a strategic manner.” Qualcomm has a long track record of using multiple foundry partners, sometimes even for the same chip.

The biggest question facing Intel is whether it can make good on its technology promises after years of delays under previous Chief Executive Brian Krzanich. In recent weeks, Intel announced the delay of a new data center chip called Sapphire Rapids.

But David Kanter, an analyst with Real World Technologies, said Intel is being more cautious than in the past. The years of delays resulted in part from the “hubris” of tackling multiple technical problems in a single generation of technology.

This time, Intel is laying out five generations of technology in four years, tackling smaller sets of problems, and also saying that it might not introduce the new EUV technology with its forthcoming “Intel 18A” process if it is not ready.

“Intel is absolutely going to catch up, and be ahead in some dimensions, with TSMC over the next few years,” Kanter, the analyst, said. “Intel really does have people who spend all their time looking at how to deploy new materials and technology to juice their performance.”

© Thomson Reuters 2021

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Pegasus Spyware: French President Emmanuel Macron Changes Phone, Phone Number



By Reuters | Updated: 23 July 2021

French President Emmanuel Macron has changed his mobile phone and phone number in light of the Pegasus spyware case, a presidency official said on Thursday, in one of the first concrete actions announced in relation to the scandal.

“He’s got several phone numbers. This does not mean he has been spied on. It’s just additional security,” the official told Reuters. Government spokesman Gabriel Attal said the president’s security protocols were being adapted in light of the incident.

A global outcry was triggered when several international media organisations reported that the Pegasus spyware was used in hacking smartphones belonging to journalists, human rights activists, and government officials in several countries.

In Israel, home of Pegasus developer NSO Group, a senior lawmaker said a parliamentary panel may look into spyware export restrictions. NSO says its software is used to fight crime and terrorism and has denied any wrongdoing.

“Obviously we’re taking (this) very seriously,” Attal told reporters hours after an emergency cabinet meeting focused on the Pegasus allegations.

Le Monde newspaper and Radio France broadcaster reported on Tuesday that Macron’s phone was on a list of potential targets for surveillance by Morocco. The two media said that they did not have access to Macron’s phone and could not verify if his phone had indeed been spied on.

Morocco has rejected these allegations.

A French lawyer for Morocco, Olivier Baratelli, said the government planned to lodge defamation lawsuits in Paris against nongovernmental organisations Amnesty International and Forbidden Stories, according to French news outlet franceinfo on Thursday. The two groups participated in the Pegasus probe and alleged Morocco had targeted French officials for surveillance with the spyware.

Amid mounting EU concern, German Chancellor Angela Merkel told reporters in Berlin that spyware should be denied to countries where there is no judicial oversight.

Hungarian prosecutors on Thursday launched an investigation into multiple complaints received in the wake of the reports.

Israel has appointed an inter-ministerial team to assess reports based on an investigation by 17 media organisations that said Pegasus had been used in attempted or successful hacks of smartphones using malware that enables the extraction of messages, records calls and secretly activates microphones.


NSO has rejected the reporting by the media partners as “full of wrong assumptions and uncorroborated theories.” Reuters has not independently verified the reporting.

“We certainly have to look anew at this whole subject of licences granted by DECA,” Ram Ben-Barak, head of the Knesset Foreign Affairs and Defence Committee, told Israel’s Army Radio, referring to the government-run Defence Export Controls Agency.

The Israeli government team “will conduct its checks, and we will be sure to look into the findings and see if we need to fix things here”, said Ben-Barak. A former deputy chief of Mossad, he said proper use of Pegasus had “helped a great many people”.

DECA is within Israel’s Defence Ministry and oversees NSO exports. Both the ministry and the firm have said that Pegasus is meant to be used to track only terrorists or criminals, and that all foreign clients are vetted governments.

NSO says it does not know the specific identities of people against whom clients use Pegasus. If it receives a complaint of Pegasus having been misused by a client, NSO can retroactively acquire the target lists and, should the complaint prove true, unilaterally shut down that client’s software, the company says.

Other world leaders among those whose phone numbers the news organisations said were on a list of possible targets include Pakistani Prime Minister Imram Khan and Morocco’s King Mohammed VI.

© Thomson Reuters 2021

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India’s Smartphone Sales Fell 13 Percent During Second COVID-19 Wave: Canalys



By Reuters | Updated: 22 July 2021

India’s smartphone sales fell 13 percent in the second quarter compared with the previous one as a second wave of COVID-19 infections hurt demand in the world’s No. 2 smartphone market, a research report said on Thursday.

Online smartphones purchases, however, helped sales surge 87 percent compared with a year earlier, according to market research firm Canalys.

“Smartphone vendors in India had assumed COVID-19 would not return, and several planned to invest in infrastructure for branded stores and partnerships with third-party offline channels. But once again they were quickly compelled to pivot to an online strategy,” Canalys analyst Sanyam Chaurasia wrote in the report.

China’s Xiaomi continued to be the top brand favoured by Indian buyers with a 29 percent market share, followed by South Korea’s Samsung Electronics at 17 percent share, Canalys said.

Chaurasia predicted the country will see a rebound in the second half of this year as vaccinations boost consumer confidence and as smartphone brands launch new products.

As the threat of a third wave of COVID-19 infections still looms in India, customer behaviour and industrial operations will continue to adjust to pandemic conditions, helping reduce the impact, the analyst wrote.

© Thomson Reuters 2021

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Pegasus Spyware Potentially Targeted French President Emmanuel Macron’s Phone on Behalf of Morocco: Report



By Reuters | Updated: 21 July 2021

The phone of French President Emmanuel Macron was on a list of potential targets for potential surveillance on behalf of Morocco in the Pegasus spyware case, French daily Le Monde reported on Tuesday.

The French presidency said that if the revelations about Macron’s phone were true, they would be very serious. The authorities would investigate them to shed all necessary light on the reports, it said.

Le Monde said that, according to sources, one of Macron’s phone numbers, which he had used regularly since 2017, is on the list of numbers selected by Morocco’s intelligence service for potential cyber-spying.

Morocco had issued a statement on Monday denying any involvement in using Pegasus and rejecting what it called “unfounded and false allegations”. Moroccan officials could not immediately be reached for comment on the report about Macron on Tuesday.

Former French Prime Minister Edouard Philippe and 14 ministers had also been targeted in 2019, Le Monde said.

An investigation published on Sunday by 17 media organisations, led by the Paris-based non-profit journalism group Forbidden Stories, said the spyware, made and licensed by Israeli company NSO, had been used in attempted and successful hacks of smartphones belonging to journalists, government officials and human rights activists on a global scale.

NSO issued a statement on Sunday rejecting the reporting by the media partners, saying it was “full of wrong assumptions and uncorroborated theories”. Its product is intended only for use by government intelligence and law enforcement agencies to fight terrorism and crime, it said.

An NSO spokesman did not immediately respond to a request by Reuters for comment on Tuesday on the reports in Le Monde and other French media about Macron.

Le Monde stressed it did not have access to Macron’s phone and therefore could not verify if it was indeed spied upon, but it could verify other phones, including that of former environment minister Francois de Rugy, and was able to verify the latter was spied on.

Also on Tuesday, the Paris prosecutor’s office opened a probe into allegations by investigative news website Mediapart and two of its journalists that they had been spied on by Morocco using the Pegasus spyware.

“The only way to get to the bottom of this is for judicial authorities to carry out an independent investigation on widespread spying organised in France by Morocco,” Mediapart said in a tweet.

The Paris prosecutor’s statement did not mention Morocco and said only that it has decided to open the probe after receiving the complaint from Mediapart and its reporters.

The Guardian, one of the media outlets involved in the investigation, said the probe suggested “widespread and continuing abuse” of NSO’s hacking software. It described it as malware that infects smartphones to enable the extraction of messages, photos and emails, record calls and secretly activate microphones.

NSO Group founder Shalev Hulio told Tel Aviv radio station 103 FM earlier on Tuesday that the published list of alleged Pegasus targets “is not linked to NSO”.

“The platform we produce prevents terrorist attacks and saves lives,” he said in the interview.

Hulio said that over its 11-year existence, NSO has worked with 45 countries and turned down almost 90 countries. He declined to name any of them.

“I think that, ultimately, this will end up in the courts, with a legal ruling in our favour, after we file defamation suits, because we won’t have any other choice,” he said.

© Thomson Reuters 2021

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