What does Huawei’s new smartphone chip mean? The controversial Chinese telecoms company has hit the headlines because its new Mate 60 Pro phone uses a sophisticated home-grown chip. SMIC, the Chinese chipmaker that Huawei worked with, has never produced such an advanced semiconductor.
The chip industry is divided over what this means. On the one hand, SMIC has only managed to replicate a manufacturing process – called 7-nanometre – that Taiwan’s TSMC, the world’s leading chipmaker, was already producing in high volumes in 2018. SMIC typically lags half a decade behind TSMC in introducing new manufacturing processes, so by this measure the Chinese company’s 7nm process arrived right on schedule.
Furthermore, SMIC has been using DUV lithography tools to produce Huawei’s chips, rather than the more advanced EUV tools it is prohibited from purchasing. Foreign chipmakers such as TSMC and Intel learnt to produce 7nm chips on DUV machines years ago, before turning to more efficient EUV tools. So SMIC’s manufacturing costs are probably only competitive because the Chinese government is footing the bill. So the company’s 7nm chip is far from an unprecedented breakthrough.
Nevertheless, the fact that SMIC has produced millions of such chips is real progress – and evidence that the US, Dutch and Japanese controls are far from watertight. The Netherlands will continue to allow the shipment of advanced DUV lithography tools until the end of this year. Meanwhile, companies from all three countries and other Western nations continue to ship less advanced tools to China, as well as key chemicals, gases and chip packaging equipment. China hawks in the US Congress question the logic of banning the transfer of certain tools but allowing the sale of the chemicals needed to operate them.
But focusing only on the main chip in Huawei’s new phone misses the broader implications: the Mate 60 Pro shows that Beijing is as determined as ever to drive Western chipmakers and electronics companies out of the Chinese market.
Replacing imported chips with domestic components has been China’s stated goal since around 2014, when it launched its first major semiconductor subsidy fund. But until now, most phones sold in the country – even from local brands such as Oppo and Xiaomi – have been full of foreign-made chips.
Huawei’s Mate 60 Pro is different: it may be the most ‘Chinese’ advanced smartphone ever made. As well as the phone’s primary 7nm processor, many of the phone’s ancillary chips are home-grown, including the Bluetooth, WiFi and power management chips.
Of course, no one knows whether Huawei’s homegrown suppliers could compete on cost in a competitive market. But cost matters less when the government is funding a self-sufficiency drive. As the new phone hit the shelves, Beijing announced a new $40 billion fund – one of several in recent years – to pour subsidies into chipmakers.
The government is also helping with new restrictions aimed at the Mate 60 Pro’s main rival, the iPhone. Huawei’s phone was launched amid reports that Chinese government institutions and state-owned companies are discouraging employees from buying Apple products.
All this threatens the foreign companies that have worked to stabilise trade relations between China and the West. As recently as July, US semiconductor executives made pilgrimages to Washington to argue against new restrictions on China. Now their market share is on the line. If the Chinese market looks lost, American companies have no reason to lobby for access to it.
And as their chips are replaced by local versions, they may question whether the West’s decision to continue supplying China with chip-making tools and chemicals is really in their interests.
