Huawei's Kirin 920 to shake global chip market?

When it comes to chips for powering smartphones, it has long been a story of the world's leading smartphone chip-maker -- U.S. firm Qualcomm. This time, it is a Chinese-made chip that has caught the eye of market observers.

The octa-core Kirin 920, unveiled by Huawei-owned HiSilicon on Friday, features support for QHD displays, 4K video recording and a high-speed LTE category-6 platform, something even the global industry leaders find it difficult to offer.

While it is too early to say this signals the rise of China in the global mobile processor market, the news should still come as a boon to the country's IT sector, especially the chip-making industry, which has been lagging far behind the world heavyweights.

China relies heavily on imported chips, which are among the country's top four import categories in terms of value, along with oil, iron ore and LCD panels.

As its reliance on foreign oil and iron ore cannot be reversed overnight, China has been working hard to promote the other two industries.

China has become less reliant on LCD panel imports in recent years, as its two leading makers of the panels, BOE and TCL, have been making strides in innovation. However, chips, known as the "heart" of the digital information industry for their importance, continue to be imported in massive quantities.

With China's smartphone market booming, the country imported 232.2 billion U.S. dollars' worth of integrated circuits, generally known as chips, in 2013, up 34.6 percent year on year, according to customs authorities.

The figure was higher than the 219.6 billion U.S. dollars' worth of imported oil for the year, making chips top the list of imports, resulting in a trade deficit of 144.1 billion U.S. dollars for the industry, which had been expanding for four years in a row.

However, there is still a long way to go before China can significantly reduce its chip imports.

Li Mingjun, deputy secretary general of the Shenzhen Semiconductor Industry Association, was quoted by local media as saying that most Chinese chip-makers are still only capable of making medium-to-low-end chips.

In addition, China's chip-making firms are still too small to challenge the U.S. dominance of the market, at least in the near future

Qualcomm registered a business revenue of 17.3 billion U.S. dollars in 2013, up 31.6 percent from a year earlier. The business revenue of HiSilicon, China's leading chip-maker, was only one eighth of Qualcomm's last year.

Another obstacle preventing HiSilicon's Kirin 920 from challenging the dominance of Qualcomm and other U.S. players is Huawei's reluctance to do so.

Huawei is not aiming to export its chips and does not see them as a stand-alone product, the 21st Century Business Herald quoted Xu Zhijun, deputy president of Huawei, as saying.

Xu said, "The strategy we adopt is one plus one or one plus N," which means that for every HiSilicon chip that Huawei incorporates in its products, it will integrate one chip or more from other suppliers.

The reason for this is that Huawei doesn't want to stir concerns with Qualcomm or other industry giants, fearing such a situation might affect chip supplies, the Herald reported.

Huawei was taught a tough lesson in March 2012 when it unveiled its quad-core processor K3V2 and said it would use the new chips in its Ascend D smartphones.

The new mobile phones appeared on the market several months later than planned. A source close to Huawei told the Herald that the delay was at least partly down to the high-profile release of the chips making its screen supplier Samsung nervous and leading it to stall the supply.

"We can only lead U.S. companies in sectors the size of a needle. But it is out of the question for our lead to expand to sectors the size of a matchstick," said Ren Zhengfei, Huawei's founder and CEO, during a speech earlier this year when publishing the firm's 2013 annual report.