Oppo Abandons Chip Design Unit Amid Declining Shipments: A Sign of Struggle for China’s Phone Giant

Oppo, the prominent Chinese smartphone manufacturer, has made the surprising decision to disband its chip design unit, Zeku, due to weak global demand and the need to cut costs. This move has caught many off guard, especially considering the escalating geopolitical tensions between China and the United States, which have threatened the supply chain of Chinese firms. Oppo will now have to rely on third-party chip partners instead of bolstering its in-house chip development.

Although Oppo maintained its position as the world’s fourth-largest smartphone vendor in Q1 2023, it experienced an 8% drop in shipments, according to market research firm Canalys. This decline in shipments was not unique to Oppo, as all of the top phone makers, except Apple, saw a decrease. Overall, the global smartphone market contracted by 13% during the quarter.

Oppo released a statement today to explain its decision to discontinue Zeku, its once-promising chip team. The statement cited uncertainties in the global economy and the smartphone industry as the primary factors driving the need for difficult adjustments for long-term development. Consequently, the company decided to cease the operation of Zeku.

Back in December 2021, Zeku introduced its first self-developed chipset, the MariSilicon X, a neural processing unit aimed at enhancing photo and video performance through machine learning. This move mirrored Apple’s strategy of bringing chip design in-house. Zeku even established a research base in Palo Alto.

The sudden discontinuation of Zeku is surprising, particularly since the team was actively hiring over 100 positions just a month ago, as indicated on their LinkedIn page.

The impact of this decision on Zeku’s more than 2,000 employees remains uncertain. The chip design unit has been offering competitive salaries to attract talent from established chip firms. For now, Oppo has not disclosed the future plans for the team, only stating that it will appropriately handle related matters and continue delivering excellent products and services to users worldwide.

Oppo’s decision to disband its chip design unit reflects the ongoing challenges faced by Chinese smartphone companies in their pursuit of greater control over the semiconductor supply chain. This struggle has been evident with Huawei, which lost access to advanced chips from the United States due to sanctions imposed during the Trump era. Huawei’s efforts to develop its own high-end chips through HiSilicon faced setbacks when major foundries were no longer available to manufacture them. As a result, the company resorted to spinning off its budget handset brand, Honor, as a means to help the subsidiary navigate the sanctions that have significantly impacted Huawei’s consumer business. This move was seen as an attempt to find alternative routes to sustain the brand amidst the challenges posed by the sanctions.