Huawei Faced with Chip Shortage, Halts Handset Production

Huawei, the Chinese tech giant, has had to slow down production of its premium Mate 60 phones due to an increased demand for its artificial intelligence (AI) chips and manufacturing constraints. According to sources close to the matter, Huawei uses a facility that produces both its Ascend AI chips and the Kirin chips, which are used to power its rival to Apple's iPhone. However, production has been hindered by a low yield rate, which indicates poor production quality. 

The situation has put Huawei in a challenging position. It is second-placing its handsets in the global race for AI functionality despite topping Chinese smartphone sales for the first time in over three years. Huawei declined to comment on the matter. 

The challenges faced by Huawei are a result of the US sanctions imposed in 2019, which cut off its access to advanced chipmaking tools on national security grounds, affecting its smartphone unit. Huawei has denied any security risks. 

The impact of US restrictions on sales of AI processing chips to China has left the market, which was 90 percent controlled by US giant Nvidia, seeking domestic alternatives. To improve China's position in computing power, the government has launched an initiative that has spurred local authorities to announce data center projects, bolstering public and private demand for Huawei's Ascend series.