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Oppo, a Chinese smartphone company, is shutting down its chip design business amid an uncertain economic environment and slumping smartphone sales.

With the decision to close the unit, called Zeku, the Dongguan-based company has become one of the first Chinese technology majors to pull back from the chip market.

“Due to the uncertainties in the global economy and the smartphone industry, we have to make difficult adjustments for long-term development,” a company representative was quoted by Reuters as saying.

Set up in 2019, Zeku aimed to reduce Oppo’s reliance on foreign companies for key components.

According to Bloomberg, the chip unit’s Shanghai branch had around 200 patents, many of which were semiconductor related.

Last year, the US imposed extensive restrictions on chip sales to China and other nations.

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By GlobalData

Chinese phone manufacturers, such as Oppo, now require authorisation to use chips from US-based companies.

Recently, it was reported that the US reached agreements with the Netherlands and Japan to further limit chip manufacturing technology exports.

These restrictions potentially impact Chinese companies’ access to suppliers such as ASML, the sole producer of lithography machines for advanced chip development.

Oppo, along with other smartphone manufacturers, has experienced significant declines in shipments and is grappling with excessive inventory.

Despite the gradual lifting of stringent Covid Zero measures in China, the recovery in consumer demand has been sluggish.

Citing IDC data, Bloomberg reported that Oppo was among the hardest-hit major brands in 2022.