HiSilicon, Huawei Technologies’ in-house chip design company, has become the first mainland Chinese semiconductor firm to enter the top 10 in global sales, according to a report by IC Insights.

The US semiconductor market research company reported that HiSilicon’s sales surged 54% year on year to about US$2.67 billion in the first quarter, placing it in No 10 spot for the first time. However, 90% of HiSilicon’s sales go to its parent Huawei, according to the report.

As a so-called fabless company, HiSilicon outsources its chip fabrication to pure play foundries like Taiwan Semiconductor Manufacturing Co (TSMC), which saw first quarter sales jump 45% to US$10.3 billion, bolstered in part by its business with HiSilicon.

Last year, TSMC derived 14% of its sales from HiSilicon. (Picture: Bloomberg)

HiSilicon’s sales surge comes at a time when its parent, Chinese tech giant Huawei, is scrambling to replace US chips from the likes of Qualcomm with devices designed in-house due to trade sanctions imposed by Washington.

The Chinese chip company also recently overtook Qualcomm, which ranks No 7 on IC Insights’ semiconductor sales list, as China’s top smartphone processor supplier for the first time, according to an earlier report by Chinese research firm CINNO.

“HiSilicon jumped up five spots in the ranking to 10th place, making it the first [mainland] China-based semiconductor supplier to be ranked in the worldwide top 10 listing,” IC Insights said in its report.

However, part of HiSilicon’s growth spurt this year could be attributed to Huawei stockpiling chips designed in-house in case Washington implements new measures to prevent TSMC from providing chip-making services to Huawei. A proposal under consideration would require TSMC to apply for a license if it wants to use US chip-making technology to produce chips for Huawei.

In May last year, the US put Huawei and its affiliates, including HiSilicon, on a trade blacklist that prevents them from buying US technologies and services without a license, citing national security concerns over the Chinese company’s alleged connections to the communist Chinese government. Huawei has repeatedly denied the allegations.

Most of HiSilicon’s semiconductor sales go to its parent Huawei. (Picture: Handout)

TSMC, which maintained its No 3 spot on the IC Insights top 10 semiconductor sales list, derived 14% of its sales last year from HiSilicon, up from just 5% in 2017.

IC Insights noted that much of TSMC’s growth was due to a surge in sales of 7nm application processors to Apple and HiSilicon for iPhones and Huawei-brand smartphones respectively. Together, HiSilicon and Apple represented 37% of TSMC’s total sales last year.

Huawei is reported to be moving some of its lower end chip orders away from TSMC to the Shanghai-based Semiconductor Manufacturing International Corp (SMIC), which currently does not have the capability to fabricate 7nm chips in commercial volumes.

The other new entrant on IC Insights’ top 10 list was Nvidia, which took ninth spot after posting 37% year-on-year growth in the first quarter.

Overall, US chip giant Intel leads the industry with US$19.5 billion in quarterly sales, while South Korea’s Samsung Electronics was second with US$13.9 billion. As a whole, sales of the top 10 semiconductor companies surged by 16% year on year compared with industry-wide growth of 7% year on year.