Chinese smartphone maker Oppo abruptly closes chip design unit Zeku, another casualty in semiconductor sufficiency drive

Oppo, the fourth largest smartphone brand in the world, announced the move in a short statement on Friday after giving employees less than a day’s notice
As China pushes for chip self-sufficiency, fabless firms are finding it difficult to sign on manufacturers of their designs amid US export restrictions

Semiconductors

Che Panin BeijingandIris Dengin Shenzhen

Published: 1:35pm, 12 May 2023

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Chinese smartphone maker Oppo has abruptly closed down its chip design subsidiary, Zeku, to the shock of employees, according to the company and former workers, in a new cautionary tale for Chinese businesses pursuing the government’s drive for semiconductor self-sufficiency.

Oppo announced the move on Friday with a brief statement, blaming “uncertainties in the global economy and smartphone market” and calling it a “difficult decision”.

The news came as a surprise to Zeku employees, who received less than a day’s notice. One employee, who declined to be named, told the South China Morning Post that workers were told on Thursday not to go into the office the next day. “I can’t even go back to the office to get the laptop,” the employee said.

Oppo declined to comment beyond its Friday statement.

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Just two weeks ago, Zeku was still publishing ads looking for new workers. Job postings covered dozens of positions including for a chip architecture engineer, chip verification and software coders at locations in Shanghai, Beijing, Chengdu and Xian, according to its official recruitment channel on WeChat.

Oppo is one of the largest Chinese smartphone brands, ranking fourth in global shipments in the first quarter. However, as the smartphone market has declined, Oppo shipments have taken a hit, falling 22 per cent last year to 103 million units, according to data from IDC.

Oppo set up Zeku in 2019 to design chips that could be used in its gadgets. The move was similar to what rival Huawei Technologies had already done with its HiSilicon subsidiary. Other Chinese smartphone makers, including Xiaomi, have also set up their own chip ventures.

Zeku’s website describes the business as a state-of-the-art semiconductor systems provider with offices in San Diego and Palo Alto in California and Yokohama, Japan. The company has not provided payroll numbers, but employees at the company estimated that it had nearly 3,000 workers after years of aggressive recruitment.

The closure comes amid a tough environment for fabless chip design firms in China, where chip acquisition has been hampered by escalating US export restrictions targeting advanced semiconductors. Out of 3,243 fabless chip firms in China last year, only 566 had sales above 100 million yuan (US$14.4 million), according to Wei Shaojun, president of integrated circuit design at the China Semiconductor Industry Association (CSIA).

Under sanctions that restrict the export of advanced chips using US-origin technology, it is becoming increasingly difficult for China’s fabless firms to find manufacturers for their designs.

Oppo’s Find X5 model released in 2021 featured its self-developed image processor MariSilicon X. Photo: Handout

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chip maker, stopped taking HiSilicon orders after the US sanctioned Huawei. Washington has not specifically targeted Oppo, but updates to US export controls last October effectively ban the export to China of any sufficiently advanced chips or chip-making equipment without explicit approval.

In December 2021, Oppo unveiled its first in-house image processor called MariSilicon X, which debuted in the company’s Find X series smartphones. TSMC manufactured the chip using its 6-nanometre node process, which is now under the 14-nm threshold of Washington’s sanctions.

In late 2022, Oppo unveiled its second in-house chip focusing on enhancing Bluetooth audio performance.

Oppo has never disclosed how much it invested in Zeku prior to shutting it down.