Oppo Abruptly Shuts Down Chip Design Subsidiary, Zeku, Amidst Economic Uncertainties

In a surprising development, Oppo, one of China’s largest smartphone brands, abruptly announced the shutdown of its chip design subsidiary, Zeku. The announcement was met with shock from employees and former workers, underlining the challenges faced by Chinese firms in their quest for semiconductor self-sufficiency.

According to the South China Morning Post, Oppo cited “uncertainties in the global economy and smartphone market” for the closure, labeling it as a “difficult decision”. The move was unexpected, with employees receiving less than a day’s notice. Some were even unable to retrieve their belongings from the office, according to an anonymous source talking to the Post. Just two weeks prior to the closure, Zeku had been actively recruiting for various positions in multiple locations, including Shanghai, Beijing, Chengdu, and Xian. However, Oppo’s global shipments took a significant hit in the past year, falling 22% to 103 million units, as per data from IDC.

Founded in 2019, Zeku was set up as part of Oppo’s strategy to design chips in-house, mirroring moves made by other Chinese smartphone makers like Huawei and Xiaomi. While the number of Zeku’s employees was not officially disclosed, insiders estimated nearly 3,000 employees on its payroll.

The Post makes some interesting observations about the Chinese fabless chip industry: the abrupt closure of Zeku underscores the difficult landscape for fabless chip design firms in China. The nation’s semiconductor industry is currently grappling with escalating US export restrictions targeting advanced chips. Only a fraction of China’s fabless chip firms had sales exceeding 100 million yuan ($14.4 million) last year, according to Wei Shaojun, president of integrated circuit design at the China Semiconductor Industry Association (CSIA). Under the current US sanctions, exporting advanced chips or chip-making equipment to China without explicit approval has become increasingly difficult. Last year, Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chip maker, halted orders from Huawei’s HiSilicon due to US sanctions.

Oppo had made some strides in chip innovation, unveiling its first in-house image processor, MariSilicon X, in December 2021. The chip, manufactured by TSMC, was featured in Oppo’s Find X series smartphones. The company also revealed its second in-house chip aimed at improving Bluetooth audio performance in late 2022.

The closure of Zeku is a significant blow to Oppo and to China’s broader aspirations for semiconductor self-sufficiency. It remains to be seen how the company, and the industry at large, will navigate these turbulent waters in the future. The company has not disclosed the amount invested in Zeku before its closure.