Huawei’s Semiconductor Breakthrough Poses Threat to Apple in China Despite US Sanctions

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Image Source: AI Imagine 

Huawei has quietly unveiled its latest flagship smartphone, the Mate 60 Pro, with a highly advanced 7nm chip inside, sparking alarm in Washington over China’s rapid semiconductor progress. This breakthrough poses a renewed challenge to Apple in one of its largest markets.

The Mate 60 Pro’s processor combines 5G connectivity and was produced by China’s largest chipmaker, SMIC. This has raised questions over how Huawei acquired the technology despite US sanctions that have sought to cut off the company from vital semiconductor supplies.

SMIC is also on the US Entity List but somehow manufactured the chip using a 7nm process without key lithography machines from Dutch firm ASML. The efficiency of this method is uncertain. However, Huawei obtaining advanced chips again could allow it to compete with premium brands like Apple.

Huawei’s Troubles Due to US Blacklisting

For years, Huawei has faced US allegations of links to China’s Communist Party and military, posing a national security risk. Huawei denies these accusations.

Starting in 2019, the Trump administration enacted sanctions that banned Huawei from accessing critical technologies including 5G chips, Google software and its leading smartphone processor made by TSMC.

These restrictions decimated Huawei’s smartphone business. It fell from being the world’s top smartphone vendor to now holding minimal global market share outside China. Unable to source 5G chips and its flagship processor from TSMC, Huawei could no longer equip devices with cutting-edge technology.

Mate 60 Pro Chip Raises Eyebrows
Huawei, Apple and Samsung are among the few companies that design their own mobile processors. But Huawei’s chips were manufactured by TSMC, the world’s most advanced semiconductor fabricator.

US sanctions barred Huawei from utilizing any American technology in chip fabrication. This excluded working with TSMC, though the Taiwanese firm remains a leader in sub-7nm manufacturing.

Industry observers were stunned when teardowns of the Mate 60 Pro, launched quietly in China this month, revealed a 7nm chip produced by SMIC. As China’s largest contract chipmaker, SMIC is also subject to US export restrictions.

It was believed SMIC lacked the capabilities for advanced 7nm production. But the Kirin 9000S processor in the Mate 60 Pro combines 5G and was made with SMIC’s 7nm process.

This demonstrates China’s rapid progress in semiconductors without key equipment like ASML’s EUV lithography tools. However, the efficiency of SMIC’s 7nm method raises doubts about yields and costs at scale.

Using Older Tools for Cutting-Edge Chips

SMIC struggled for years to achieve advanced 7nm production. A key barrier was lack of ASML’s extreme ultraviolet (EUV) lithography machines, due to Dutch export restrictions on selling such equipment to China.

EUV is required for the most advanced semiconductor manufacturing processes. But SMIC seems to have developed 7nm fabrication by repurposing older equipment, without the benefits of EUV.

According to experts, this is less efficient than deploying leading-edge tools. It remains uncertain whether SMIC can deliver high-yielding 7nm chip output at profitable economic levels.

Washington Debates Stronger Export Controls

SMIC producing 7nm chips has exposed flaws in US sanctions. Restrictions sought to prevent Chinese firms from making advanced semiconductors while allowing trailing-edge processes.

But this Kirin 9000S chip shows the limitations of this approach. Washington is likely to impose tighter export controls in response, potentially encompassing more aspects of semiconductor design and equipment.

For now, the efficiency and yields of SMIC’s 7nm production are in question. But Huawei gaining access to modern chip technology again poses major consequences, particularly for Apple in China.

Resurgent Huawei Spells Trouble for Apple in China

Huawei’s smartphone sales cratered without the ability to source advanced chips and 5G modems. A potential comeback powered by the Kirin 9000S could make Huawei competitive again in high-end devices.

This would threaten Apple in China, one of its largest markets. Huawei previously traded places with Apple for market leadership in China until US sanctions kicked in.

With its brand image and national prestige, a revitalized Huawei with strong semiconductor capabilities could lure back Chinese consumers interested in premium phones.

Apple already faces an uncertain environment in China between economicgrowth concerns, geopolitics and unverified reports of government staff being barred from bringing iPhones to work.

But analysts say Huawei poses the greatest danger if it re-establishes itself as an innovative technology leader able to go toe-to-toe with Apple.

Between its advancements in foldable phones and now semiconductors, Huawei may have an opening to rebuild its Chinese customer base at Apple’s expense.

Uncertainty Remains Over SMIC’s 7nm Process

While the Mate 60 Pro’s Kirin 9000S chip is built on SMIC’s 7nm process, doubts persist regarding the yields and efficiency of this fabrication method without EUV lithography tools.

It is a waiting game to see if SMIC can produce Huawei-level chip output at scale economically using repurposed older equipment. The yields achieved on 7nm chips without leading-edge tools are assumed to be low.

If production volume or profit margins prove insufficient, it may hamper Huawei’s capability to return as a major smartphone player both in China and globally.

But the early benchmarks set by the Mate 60 Pro and its Kirin chip certainly demonstrate China’s tenacity in developing semiconductor technology despite US roadblocks.

Huawei Sidesteps US Sanctions
Given Huawei’s central place in US-China trade and technology tensions, Washington is unlikely to let this chip development go unanswered. Tighter export controls are already under consideration.

For now, Huawei has at least partially overcome key US supply chain restrictions harming its device sales. But true technological self-reliance remains elusive without semiconductor manufacturing reaching the sophistication of leading-edge foundries like TSMC and Samsung.

The geopolitical ramifications stretch beyond Huawei’s fate to encompass debates over bilateral trade, China’s rise and technology dominance. As the Mate 60 Pro shows, the chip wars between the US and China continue escalating with ever-higher stakes.

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