It has been a fascinating couple of years for Huawei. Following the early challenges faced by the Chinese company because of the trade penalties imposed by the US, it eventually experienced an unexpected revival in the mobile industry. This revival was made possible by using domestically produced processors, just two generations behind those used by its competitors. In addition, the Chinese government has also provided significant funding to support its silicon sector, to the extent that Huawei is now actively working on developing its chip network. FormerFormer President Donald Trump’s previous efforts to limit Huawei’s access to essential resources sped up China’s semiconductor progress.
The initial action taken by Trump against Huawei was announcing a national emergency in May 2019. As a result, the Commerce Department included the business in its Entity List, stating worries about monitoring and connections to the Chinese state security. Therefore, Google could not continue offering Android assistance to Huawei, resulting in the Mate 30 series and subsequent models not having access to Google apps. Eventually, two years later, they would switch to Huawei’s alternative to Android, HarmonyOS.
In November 2019, the FCC prohibited carriers from purchasing Huawei and ZTE networking equipment using government subsidies. In March of the following year, Trump approved a bill that would provide funds to cover the cost of replacing Chinese equipment, even if it required spending an estimated $1.8 billion. Huawei tried to take legal action against the FCC regarding these limitations, but the court ruled in the regulator’s favour.
The technology conflict intensified quickly in May 2020, when the US imposed additional limitations on Huawei’s ability to obtain American equipment and software. This meant that Taiwan Semiconductor Manufacturing Company (TSMC), the world’s top manufacturer, would need to cease production of HiSilicon chips for Huawei, its second-largest customer at the time, following Apple. Similarly, Samsung and SK Hynix were required to finish the sale of chips to the Chinese brand before the September 15, 2020, cutoff. According to Bloomberg’s analysis of the most recent Huawei handsets, the business could quickly accumulate a supply of these memory chips from Korea.
Huawei had to depend more on local chip manufacturers, specifically Semiconductor Manufacturing International Corporation (SMIC) and Shanghai IC R&D Centre, for processors. However, there was a notable decrease in performance. At that time, SMIC had recently begun producing 14nm chips for Huawei, while TSMC had already advanced to 5nm and provided Kirin 9000 processors for Huawei’s Mate 40. At that time, Huawei’s mobile boss, Richard Yu, said it would be the last Kirin chip in the “high-end” category.
Qualcomm was eventually permitted to provide 4G chips to Huawei starting November 2020, although that’s four G, and market share estimates are accurate. The once dominant brand in China experienced a decline to only 16 per cent in the local market in January 2021 (and further declined to a modest 6 per cent in Q2 2022), as reported by Counterpoint. Huawei’s worldwide market share has been insignificant since 2021. However, according to Counterpoint and Statista, since Huawei sold the Honour brand in November 2020, the spin-off has consistently achieved one of the top positions in the quarterly charts in China.
China’s investment in chip technology yielded results when SMIC achieved a breakthrough in 7nm fabrication in August 2022. This progress in just two years represents a significant improvement from the previous 14nm technology. TechInsights reports that China’s achievement in this area surpassed the pace of both TSMC and Samsung. In addition, this accomplishment was achieved without utilising the most cutting-edge lithography equipment, which was predominantly exclusive to companies such as ASML and Nikon. Earlier this year, the US persuaded the Netherlands and Japan to limit China’s access to advanced chipmaking technology.
According to a thorough examination by Bloomberg, it was discovered that this could result from an investment fund by the Shenzhen municipal government in 2019, which assisted Huawei in developing “an independent chip network.” Huawei might discreetly acquire lithography technology by establishing a network of businesses and facilitating the exchange of expertise, allowing them to collaborate without attracting attention. Huawei reportedly successfully recruited several previous ASML staff members, which was probably crucial in achieving the 7nm node process for its most recent CPU (the 5G-capable HiSilicon Kirin 9000S, manufactured by SMIC). Benchmarks imply that this chip’s performance is comparable to Qualcomm’s Snapdragon 888 from late 2020, indicating that it is around two generations behind the top competitors.
Huawei then opted for a somewhat unconventional method to introduce its Kirin 9000S devices in early September of this year. The business suddenly announced on Weibo, without any launch event or teaser, that the Mate 60 and Mate 60 Pro were now available. This unexpected manoeuvre happened at the same time as the arrival of US Commerce Secretary Gina Raimondo in China, which caused many people to speculate that some officials gave Huawei specific instructions to release these 5G equipment quickly before the planned date. Shortly after, China announced a $40 billion fund to support the growth of its chip sector. Additionally, one week later, they released two more phones, namely the Mate 60 Pro+ and the Mate X5 foldable.
Individuals observed Huawei Mate 60 series mobile devices showcased at a Huawei main store in Beijing, China, on September 25, 2023. Photo by REUTERS/Florence Lo
REUTERS / Reuters
Although it may appear as a short-term victory for China, the country had a significant surge of 90 per cent in the closure of chip-related companies in 2023 (as of December 11). This indicates a poor state of the economy, as reported by TMTPost. On the other hand, 65,700 new companies associated with chips registered over the same time frame, showing a 9.5 per cent rise compared to the previous year. The report stated that the RAM chips and processors built in China and used in Huawei’s Mate 60 series demonstrate an increasing dependence on the domestic supply chain. This trend is expected to contribute to the ongoing growth of the Chinese semiconductor industry.
While the US government aims to restrict China’s access to advanced technology, it is a fact that Western corporations still desire to enter the large market in the eastern region. NVIDIA is a good example, as it is currently discussing with the authorities the details of AI chips that it may legally sell to China without violating US export regulations. “What we must prevent them from exporting are the most advanced, high-performance AI chips, which would give China the ability to develop their cutting-edge models,” Raimondo said to Reuters. If that doesn’t happen, China might someday develop an AI processor that is equally impressive, if not more so. For example, they just announced a light-based CPU that is supposedly 3,000 times quicker than NVIDIA’s A100.
The technology conflict between the United States and China extends beyond semiconductors. The Biden administration suggests reducing tax benefits for electric vehicles that include Chinese parts, particularly batteries, to encourage domestic car manufacturers to rely less on Chinese components. The compromise here is always the reduction in expenses (as is the concept behind Ford and CATL’s Michigan battery facility), as well as the US market not benefiting from possible advancements in power density or output, specifically the upcoming 150kWh battery showcased in Chinese electric vehicle manufacturer Nio’s ET7, which achieved a range of approximately 650 miles. Granted permission to enter the market, Huawei might consider selling its Aito or Luxeed electric cars in the US.
