Huawei's Comeback Challenges Western Tech Lead
New Huawei Developments Dodge US Sanctions
Hok Man So
October 04, 2023
Analysis
Huawei marked its comeback on the high-end mobile market on August 29 with the introduction of the Mate 60 Pro.
The September breakthrough reportedly posed a "threat" to Apple in China. By the end of September, media reports analyzed whether Apple could be banned in China entirely, ramping up the stakes of the tech race between the U.S. and Chinese economies once again.
Mate 60 Pro
Featuring a 7nm processing chip dubbed Kirin 9000s processor with 5G capabilities, the announcement coincided during the visit of U.S. Secretary of Commerce Gina Raimondo to senior officials of the People's Republic of China, aimed at preserving existing trade relationships.
The unveiling shocked the world since, in recent years, the U.S. had sanctioned Huawei's import and export of technology equipment to curb China’s advancements in semiconductor, AI, and computing industries, under additional categorization of security concerns during the Trump administration.
The blockade against China has been extended by the Biden administration, in an effort to retain "American tech primacy", The New York Times reported. Chinese government officials reportedly regard this as an "act of war" against the semiconductor trade.
In collaboration with SMIC and other domestic entities, Huawei's chip division,HiSilicon, is propelling China towards a new era of semiconductor independence with the initiative, extending beyond commercial competition, potentially reshaping the global tech and security landscapes.
Huawei poses a threat to the U.S. tech lead as well as Western tech leadership with new breakout production. In 2023, the European Union urged nations to ban Huawei products, as security and trade concerns over Huawei’s history and track record of sanction dodging became mainstream topics of geopolitical discussion.
High-end, In-Housed Chips
To develop these high-end chips, the approach of Chinese manufacturers involves leveraging existing, less advanced technology to propel themselves towards the forefront of technological advancements.
While China maintains access to somewhat outdated technology like NVIDIA's H800 chips and the means to produce lower-tier (e.g., 28 nm) chips, Huawei utilized the legacy ARM instruction set architecture, EDA tools, and prior-generation deep ultraviolet (DUV) lithography tools to craft a fairly competitive chipset in its latest release, Reuters reported in March.
Douglas Fuller, a specialist in China’s semiconductor industry, was quoted by The Financial Times explaining that Chinese manufacturers are compensating for the absence of extreme ultraviolet (EUV) technology by employing additional exposure, although this results in a significantly reduced yield.
The utilization of DUV machinery necessitates three to four rounds of patterning to successfully complete 7 nm chips.
Huawei’s History of Sanction Evasion
The U.S. initially limited direct sales of American-made semiconductors to Huawei by including them on the Entity List, essentially necessitating a license for such exports. Despite this, Huawei could purchase advanced chips from overseas facilities in Taiwan, Korea, and occasionally the US (with a license for low-end chips).
This loophole prompted the Entity List Foreign Direct Product Rule (FDPR), compelling companies employing US technology to obtain a license to sell to Huawei.
Over time, the U.S. also curtailed semiconductor manufacturing equipment, and further tightened controls by adding China's leading chip manufacturer, SMIC, to the Entity List. SMIC was added to the entity list during the last days of the Trump administration, and has since violated sanctions, U.S. lawmakers announced, Bloomberg reported in September.
Huawei also attempted to circumvent these restrictions by redesigning over 4,000 circuit boards and securing local suppliers for more than 13,000 necessary components, aiming to minimize reliance on and risks associated with supply chains using US technology, PC Magazine reported in March.
The company also developed their own OS (HarmonyOS), programming language (Canjie), and compiler to work towards self-sufficiency.
The company commenced the construction of a covert network of chip manufacturing plants, with funding stemming from approximately $30 billion USD provided by the Chinese government for chip production.
However, Huawei appears to still require external components, as evidenced by SEAGATE being previously fined $300 million USD for selling HDD hard drives to Huawei in violation of US restriction laws.
National Security Concerns
Russia has been reliant on purchasing external semiconductor chips with China providing the majority since western sanctions were applied amidst the Ukrainian war.
With most dual-use chips used to support russian military efforts, it is reported that Chinese microchips have been historically terrible with large percentage of failure rates in addition to slower speeds.
However, with possibility and introduction of potential high-end chips being supplied by the domestic Chinese market, it is possible that Russia could utilize the chips to further their own development of military technology posing a risk (cybersecurity related to full on physical military assets) to the Ukraine and its allies.
China's Strategy
China's chip breakthrough has proven that Western sanctions served as a catalyst, pushing China's technology sector towards self-sufficiency. A China-centric supply chain could diminish the relevance and necessity of US technology products.
Additionally, the current chips presented by HiSilicon are estimated to be five years behind their Western counterparts.
However, with the blurred line where the Chinese Communist Party (CCP) is known to be heavily involved with Chinese companies, substantial funding provided by the government could significantly boost prioritized funding in R&D. This, in turn, could potentially enable China to resume the competition for technology dominance, with the possibility of surpassing the U.S.