Huawei's Rise in the Semiconductor Industry
Huawei's Rise in the Semiconductor Industry
Huawei's Rise in the Semiconductor Industry
Dec 18, 2023
Dec 18, 2023
Dec 18, 2023
The Financial Times reported on the moves Huawei has made in recent years, backed by the Chinese government, to grow its semiconductor development capabilities to compete with the US in order to reduce reliance on other countries to produce powerful AI chips.
In late 2020, Huawei, a major player in the mobile phone industry, faced significant challenges due to sanctions imposed by the Trump administration. These sanctions severed Huawei's access to global semiconductor supply chains, hindering its ability to procure chips for advanced handsets. To navigate these challenges, Huawei formed a strategic partnership with the Semiconductor Manufacturing International Corporation (SMIC), a state-backed Chinese foundry. This collaboration aimed to produce advanced chips using older equipment, a move fraught with uncertainty and high costs.
By August 2023, despite the odds, Huawei launched the Mate 60 series phone, powered by the Kirin 9000S chip. This chip, although not as advanced as its contemporaries from Qualcomm, was well-received in China, marking Huawei's comeback in the chip market after years of sanctions. The US expressed surprise and concern over Huawei's ability to circumvent sanctions, sparking discussions about the implications of this technological breakthrough.
The Kirin 9000S's development relied on less efficient deep ultraviolet (DUV) machines instead of the more advanced extreme ultraviolet (EUV) lithography. This choice was initially driven by budget constraints and later by necessity, as EUV equipment became inaccessible due to export controls. The use of DUV machines increased production steps, costs, and led to a lower yield rate (percentage of non-defective chips), but it was a critical factor in Huawei's ability to continue chip production.
Significant state support and investment in Huawei and SMIC were evident. The Chinese government's financial backing played a crucial role in offsetting the high costs of chip production. This state support is part of China's broader strategy to achieve technological self-sufficiency and reduce reliance on foreign technology, especially given the ongoing geopolitical tensions and trade restrictions.
Looking ahead, Huawei and SMIC are expanding their focus to include chips for artificial intelligence (AI) systems. This shift is in response to U.S. restrictions on high-performance chip sales to China. Huawei's Ascend series of AI chips have been identified as potential alternatives to Nvidia's products, despite lagging in overall performance. Huawei has already started trials of these chips with major Chinese internet companies including Tencent and Baidu.
The success of the Kirin 9000S and the ongoing development of AI chips reflect China's determination to sustain and advance its semiconductor industry. However, challenges remain, particularly in the manufacturing process of data center chips, which are prone to a higher defect rate. Moreover, supply chain restrictions and the potential exhaustion of critical machine parts and materials pose additional hurdles for SMIC's production capabilities.
The journey of Huawei and SMIC, supported by the Chinese state, underscores China's ambition to become a semiconductor superpower. It also highlights the complexities and interdependencies of the global tech industry, where geopolitical dynamics can significantly impact technological progress and market competition.
The Financial Times reported on the moves Huawei has made in recent years, backed by the Chinese government, to grow its semiconductor development capabilities to compete with the US in order to reduce reliance on other countries to produce powerful AI chips.
In late 2020, Huawei, a major player in the mobile phone industry, faced significant challenges due to sanctions imposed by the Trump administration. These sanctions severed Huawei's access to global semiconductor supply chains, hindering its ability to procure chips for advanced handsets. To navigate these challenges, Huawei formed a strategic partnership with the Semiconductor Manufacturing International Corporation (SMIC), a state-backed Chinese foundry. This collaboration aimed to produce advanced chips using older equipment, a move fraught with uncertainty and high costs.
By August 2023, despite the odds, Huawei launched the Mate 60 series phone, powered by the Kirin 9000S chip. This chip, although not as advanced as its contemporaries from Qualcomm, was well-received in China, marking Huawei's comeback in the chip market after years of sanctions. The US expressed surprise and concern over Huawei's ability to circumvent sanctions, sparking discussions about the implications of this technological breakthrough.
The Kirin 9000S's development relied on less efficient deep ultraviolet (DUV) machines instead of the more advanced extreme ultraviolet (EUV) lithography. This choice was initially driven by budget constraints and later by necessity, as EUV equipment became inaccessible due to export controls. The use of DUV machines increased production steps, costs, and led to a lower yield rate (percentage of non-defective chips), but it was a critical factor in Huawei's ability to continue chip production.
Significant state support and investment in Huawei and SMIC were evident. The Chinese government's financial backing played a crucial role in offsetting the high costs of chip production. This state support is part of China's broader strategy to achieve technological self-sufficiency and reduce reliance on foreign technology, especially given the ongoing geopolitical tensions and trade restrictions.
Looking ahead, Huawei and SMIC are expanding their focus to include chips for artificial intelligence (AI) systems. This shift is in response to U.S. restrictions on high-performance chip sales to China. Huawei's Ascend series of AI chips have been identified as potential alternatives to Nvidia's products, despite lagging in overall performance. Huawei has already started trials of these chips with major Chinese internet companies including Tencent and Baidu.
The success of the Kirin 9000S and the ongoing development of AI chips reflect China's determination to sustain and advance its semiconductor industry. However, challenges remain, particularly in the manufacturing process of data center chips, which are prone to a higher defect rate. Moreover, supply chain restrictions and the potential exhaustion of critical machine parts and materials pose additional hurdles for SMIC's production capabilities.
The journey of Huawei and SMIC, supported by the Chinese state, underscores China's ambition to become a semiconductor superpower. It also highlights the complexities and interdependencies of the global tech industry, where geopolitical dynamics can significantly impact technological progress and market competition.
The Financial Times reported on the moves Huawei has made in recent years, backed by the Chinese government, to grow its semiconductor development capabilities to compete with the US in order to reduce reliance on other countries to produce powerful AI chips.
In late 2020, Huawei, a major player in the mobile phone industry, faced significant challenges due to sanctions imposed by the Trump administration. These sanctions severed Huawei's access to global semiconductor supply chains, hindering its ability to procure chips for advanced handsets. To navigate these challenges, Huawei formed a strategic partnership with the Semiconductor Manufacturing International Corporation (SMIC), a state-backed Chinese foundry. This collaboration aimed to produce advanced chips using older equipment, a move fraught with uncertainty and high costs.
By August 2023, despite the odds, Huawei launched the Mate 60 series phone, powered by the Kirin 9000S chip. This chip, although not as advanced as its contemporaries from Qualcomm, was well-received in China, marking Huawei's comeback in the chip market after years of sanctions. The US expressed surprise and concern over Huawei's ability to circumvent sanctions, sparking discussions about the implications of this technological breakthrough.
The Kirin 9000S's development relied on less efficient deep ultraviolet (DUV) machines instead of the more advanced extreme ultraviolet (EUV) lithography. This choice was initially driven by budget constraints and later by necessity, as EUV equipment became inaccessible due to export controls. The use of DUV machines increased production steps, costs, and led to a lower yield rate (percentage of non-defective chips), but it was a critical factor in Huawei's ability to continue chip production.
Significant state support and investment in Huawei and SMIC were evident. The Chinese government's financial backing played a crucial role in offsetting the high costs of chip production. This state support is part of China's broader strategy to achieve technological self-sufficiency and reduce reliance on foreign technology, especially given the ongoing geopolitical tensions and trade restrictions.
Looking ahead, Huawei and SMIC are expanding their focus to include chips for artificial intelligence (AI) systems. This shift is in response to U.S. restrictions on high-performance chip sales to China. Huawei's Ascend series of AI chips have been identified as potential alternatives to Nvidia's products, despite lagging in overall performance. Huawei has already started trials of these chips with major Chinese internet companies including Tencent and Baidu.
The success of the Kirin 9000S and the ongoing development of AI chips reflect China's determination to sustain and advance its semiconductor industry. However, challenges remain, particularly in the manufacturing process of data center chips, which are prone to a higher defect rate. Moreover, supply chain restrictions and the potential exhaustion of critical machine parts and materials pose additional hurdles for SMIC's production capabilities.
The journey of Huawei and SMIC, supported by the Chinese state, underscores China's ambition to become a semiconductor superpower. It also highlights the complexities and interdependencies of the global tech industry, where geopolitical dynamics can significantly impact technological progress and market competition.