Oppo, one of China’s largest smartphone makers, is shutting down its chip design business as the global smartphone market continues to decline. Due to the uncertainty surrounding the mobile industry and the global economy, the company decided to cease operations of its Zeku unit, which was established in 2019 to design applications processors, modems, and other connectivity solutions, along with image-processing chips. While Zeku was intended to work like Apple’s in-house Silicon unit, recent years saw a wave of investment into the chip sector by electronics companies that sought to avoid tightening US export restrictions. Oppo’s move marks one of the first instances of a major Chinese tech firm retreating from the sector.
Retreat from the Chip Sector
Oppo has been among the worst-performing major smartphone brands over the past year, with double-digit shipment drops and a glut of inventory. Other handset manufacturers are facing similar challenges, while China’s smartphone market, the biggest in the world, has seen a sharp drop in demand for over a year. Although the country has begun reopening following strict Covid Zero restrictions, translating this into an uptick in consumer demand has been slow so far.
The Rise and Fall of Zeku
According to its website, the Zeku unit had locations in Shanghai, Xi’an, Beijing, and Chengdu. Its Shanghai unit boasted close to 200 patents, many of which were semiconductor-related. In late 2021, Zeku introduced the MariSilicon X image-processing chip that has since been featured in Oppo’s flagship devices. Despite this, the company has decided to close the unit due to what it sees as the uncertain economic and mobile industry landscape.
What’s Next for Oppo?
The closure of Zeku will likely lead to job losses within the company, but what will Oppo do next? With demand for smartphones falling globally, the company may look to expand its reach into other areas of technology, or it may turn to more budget-friendly devices to combat falling sales of its flagship products. In any case, Oppo’s retreat from the chip sector may give other Chinese tech firms pause, as they consider their own positions within the industry.
The Future of the Chip Sector
The closure of Zeku comes as the global chip sector faces a range of challenges, from geopolitical tensions that have slowed investment, to a shortage of semiconductor chips that has affected electronics companies worldwide. The future of the sector remains unclear, but events like Oppo’s retreat may be seen as a bellwether for the industry as a whole.
Conclusion
Oppo’s decision to shut down its chip design unit underscores the challenges facing the smartphone industry today. With demand falling globally and uncertainty surrounding the future of the mobile world, the company may look to other areas of technology to stay competitive in the market. The closure of Zeku may also have implications for the rest of the chip sector, particularly as it faces geopolitical, economic, and environmental challenges worldwide.
