Huawei Technologies’ breakthrough in manufacturing an advanced chip underscores China’s resolve and ability to fight U.S. sanctions, but the effort is likely to be very costly and could prompt Washington to tighten restrictions, analysts said.
Huawei unexpectedly unveiled the latest Mate 60 Pro smartphone last week during US Commerce Secretary Gina Raimondo’s visit to China as the government prepares a new $40 billion investment fund to support the development of the chip industry.
The Mate 60 Pro features its own Kirin 9000s chip, made by the country’s leading contract chipmaker, SMIC, using advanced 7-nanometer (nm) technology, according to analysis by TechInsights, an Ottawa-based company.
The results of this study and the statements of the first users on the performance of the phone indicate that China is making progress in the development of high-end chips, even as Washington has in recent years tightened sanctions aimed at reducing access from China. to advanced chip fabrication tools.
It “demonstrates the technical progress China’s semiconductor industry has been able to achieve without EUV tools. The difficulty of achieving it also shows the resilience of the country’s chip technology capability,” said analyst Dan Hutcheson. at TechInsights.
EUV stands for lithography in the extreme ultraviolet and is used to manufacture chips of 7 nm or more.
“At the same time, this is a great geopolitical challenge for countries that have sought to restrict VU access to critical manufacturing technologies. This could result in even greater restrictions than exist today. today.
Jefferies analysts said the TechInsights findings could trigger an investigation by the U.S. Department of Commerce’s Bureau of Industry and Security, spark new debate in the United States about the effectiveness of sanctions, and prompt Congress to include even tougher tech sanctions in a competition bill it is preparing against China.
“Overall, the technology war between the United States and China is likely to escalate,” they said in a note.
A U.S. Commerce Department official did not immediately respond to a request for comment Tuesday morning.
Huawei declined to comment. SMIC and China’s State Council, which handles press inquiries on behalf of the Chinese government, did not immediately respond to requests for comment.
LIMITED RESULTS
-The most advanced chip that SMIC was known to manufacture was the 14nm, because Washington at the end of 2020 prohibited it from obtaining an EUV machine from the Dutch company ASML.
But TechInsights said last year it believed SMIC had succeeded in producing 7nm chips by modifying simpler DUV machines that it could still buy for free from ASML.
Some analysts, including Jefferies, said it’s also possible that Huawei bought SMIC’s technology and equipment to make the chip rather than doing it collaboratively.
Regardless of the chip manufacturer, Tilly Zhang, an analyst at Gavekal Dragonomics, downplayed the success, citing a low yield rate that reduces the number of usable chips from each wafer and increases costs, along with new controls export restrictions imposed by the Netherlands which will limit SMIC’s access to higher immersion DUV machines.
“They have just demonstrated that they are prepared to accept costs much higher than those which are normally considered worthwhile. […]. Only the combination of Huawei’s large financial resources and generous government subsidies could allow it to sell phones using these chips at normal market prices,” Zhang said.
Reuters reported on Tuesday that China is set to launch a new state-backed investment fund that aims to raise about $40 billion for its chip sector, as the country ramps up efforts to catch up with states. United and other rivals.
Some research firms predict that SMIC’s 7nm process has an efficiency rate of less than 50%, when the industry standard is 90% or more, and that would limit shipments to around 2-4 million of chips, which is not enough to allow Huawei to regain its former dominant position in the smartphone market.
Jefferies analysts estimate that Huawei is gearing up to ship ten million units of the Mate 60 Pro, though it may struggle to support that amount with 7nm chips made in China.
In this case, it could look to 10nm chips, but with an estimated 20% efficiency, which refers to the number of functional chips on each silicon wafer, according to Jefferies, that would be well below 90% for the most consumer devices.
“The (US) controls impose high costs for the production of controlled technology in China,” said Doug Fuller, a chip researcher at Copenhagen Business School, adding that the Chinese government is likely footing the bill.
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