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With Huawei’s chip breakthrough, China has won a battle, if not the war
- Washington’s efforts to restrict Chinese access to critical technologies seem to have failed, with the launch of Huawei’s new 5G smartphone
- What is striking about the Mate 60 Pro is that besides its primary 7nm processor, many of its auxiliary chips are also made in China
Published: 8:30pm, 7 Oct, 2023
The US-China chip war serves as a microcosm of broader geopolitical and economic tensions. In the technological rivalry between the United States and China, particularly in the semiconductor industry, the US has attempted to disrupt global supply chains with the primary aim of hindering Chinese progress.
Washington has utilised legislation, export controls, executive orders and other measures to restrict Chinese access to critical technologies. However, these efforts seem to be ineffective, if the recent breakthrough in Chinese tech group Huawei’s semiconductor capabilities is anything to go by.
The United States was once the leader in global semiconductor manufacturing, and it is still at the forefront of chip design, with companies like Intel, AMD and Nvidia. However, China, with its ambitious “Made in China 2025” plan, has invested heavily in the semiconductor sector and made significant progress in closing the gap.
Huawei’s new Mate 60 Pro 5G-capable smartphone boasts an advanced home-grown chip that features the company’s own designs and was made using a process called 7 nanometre. This development, seen as a victory in the face of US sanctions, has sparked nationalist sentiment on Chinese social media.
The US government has initiated an investigation into the Chinese chip in Huawei’s latest phone, amid concerns about the efficacy of Washington’s sanctions aimed at throttling Chinese tech. The chip is believed to have been made by China’s Semiconductor Manufacturing International Corp (SMIC), which is blacklisted by the US.
The US Commerce Department is seeking more information about the composition of this chip, in determining whether US sanctions were violated in its manufacturing. While Washington’s approach has been to avoid a broader economic decoupling and focus on narrow tech restrictions targeting critical areas, some have warned of loopholes in such measures, including export controls, and called for stronger actions against both Huawei and SMIC.
Given the intricacy of global supply chains, however, it was always going to be difficult to put up successful hurdles and implement effective sanctions.
Huawei’s new smartphones, including the even more powerful Mate 60 Pro+, have attracted strong interest from consumers and investors. Following news of the US investigation, Chinese semiconductor equipment companies’ stocks surged amid expectations of increased state support for the sector. Companies related to lithography gear – a weak link in the sector that needs to be strengthened – especially benefited.
What is striking about the Mate 60 Pro is that besides its primary 7nm processor, many of its auxiliary chips are also made in China. Understandably, this progress towards self-sufficiency has been celebrated as a geopolitical triumph by the Chinese state media.
In October 2022, the Biden administration escalated the United States’ tech war with China by issuing export controls targeting Chinese chip firms such as Yangtze Memory Technologies Corp and SMIC. Furthermore, US allies and major chip makers including Japan and the Netherlands were urged to restrict the export of technology to Chinese companies.
In May 2023, China retaliated by imposing a ban on Micron Technology, the largest US memory chip maker, and preventing it from selling to Chinese companies working on critical infrastructure projects. While the Micron ban has had a limited impact on the US semiconductor industry, it highlights the vulnerability of US chip companies that sell to China, which is the world’s biggest market for semiconductors after all.
In August, Biden went one further, signing an executive order that will prohibit certain US investments in sensitive technology, including semiconductors.
For Beijing, what could be an exit strategy from this chip war? China is currently prioritising supply chain security and reducing its reliance on US technology.
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However, the problem with such national planning, which includes incentives to build innovation parks and subsidies for tech companies, is that it could lead to corruption and hinder genuine innovation. In the long run, it could even result in lower-quality products and less global competitiveness.
The US-China chip war has widespread economic ramifications. Not only does it have an effect on the financial performance of major tech companies, it also has considerable influence on global trade dynamics, the resilience of supply chains and matters of national security.
The current shortage of semiconductors, which hit during the Covid-19 pandemic, is a stark reminder of how easily the world economy could be affected by a disruption to supply chains. Moreover, as the world’s two biggest economies engage in a fierce battle for tech supremacy, other economies must tread carefully, balancing their economic interests against whatever concerns they might have about technological reliance and security.
For now, the 7nm chip in Huawei’s new phone is an emblem of China’s unwavering determination to achieve self-sufficiency. Despite Washington’s endeavours to curtail Chinese access to advanced chip technology, Chinese entities like Huawei and SMIC appear to have made substantial headway in chip design and manufacturing. This aligns with China’s ambition to become a semiconductor powerhouse.
At this point in the chip war, and in the wider competition between the US and China, the fact that China is advancing steadily and emerging as a formidable player in semiconductors should give the US pause.
Opinion | With Huawei’s chip breakthrough, China has won a battle, if not the war
Washington’s efforts to restrict Chinese access to critical technologies seem to have failed, with the launch of Huawei’s new 5G smartphone. What is striking about the Mate 60 Pro is that besides its primary 7nm processor, many of its auxiliary chips are also made in China.
www.scmp.com
