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The author is the author of “Chip War”
What is the significance of Huawei’s new smartphone chip? The controversial Chinese telecommunications company has made headlines because its new Mate 60 Pro phone features a sophisticated home-developed chip. SMIC, the Chinese chipmaker that Huawei has worked with, has never made such an advanced semiconductor before.
The chip industry is divided over what that means. On the one hand, SMIC has only managed to reproduce a manufacturing process called 7 nanometers, which Taiwan’s TSMC, the world’s leading chipmaker, was already producing in large numbers in 2018. SMIC is generally half a decade behind TSMC in adopting new manufacturing processes. By this metric, the Chinese company’s 7nm process is right on schedule.
In addition, to produce the Huawei chips, SMIC used DUV lithography machines instead of more advanced EUV tools, the purchase of which is prohibited. Foreign chipmakers like TSMC and Intel learned how to make 7nm chips using DUV machines years ago before turning to more efficient EUV tools. SMIC’s manufacturing costs are therefore probably only competitive because the Chinese government bears the costs. So the company’s 7nm chip is anything but an unprecedented breakthrough.
Still, the fact that SMIC has manufactured millions of such chips is real progress – and evidence that controls in the US, the Netherlands and Japan are anything but watertight. The Netherlands continues to allow advanced DUV lithography equipment to be shipped until the end of this year. Meanwhile, companies from all three countries and other Western nations continue to ship less advanced tools to China in addition to essential chemicals, gases and chip packaging equipment. China hawks in the US Congress question the logic of banning the transfer of certain tools but selling the chemicals needed to run them.
But focusing only on the main chip in Huawei’s new phone misses the broader implications: The Mate 60 Pro shows that Beijing remains determined 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 funding fund. But until now, most phones sold in the country – even from local brands like Oppo and Xiaomi – were full of foreign-made chips.
Huawei’s Mate 60 Pro is different: it may be the most “Chinese” advanced smartphone ever made. In addition to the phone’s primary 7nm processor, many of the phone’s additional chips are self-developed, including the Bluetooth, Wi-Fi and power management chips.
Of course, no one knows whether Huawei’s homegrown suppliers could compete on cost in a competitive market. But costs matter less when the government funds a self-sufficiency initiative. As the new phone launched, Beijing announced a new $40 billion fund – one of several in recent years – to provide subsidies to chipmakers.
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The government is also helping with new restrictions targeting the Mate 60 Pro’s main competitor, the iPhone. Huawei’s phone was launched alongside reports that Chinese government institutions and state-owned companies were blocking their employees from purchasing Apple products.
All of this threatens the foreign companies that have worked to stabilize trade relations between China and the West. As recently as July, US semiconductor chiefs made a pilgrimage to Washington to argue against new restrictions on China. Now their market share is at stake. If the Chinese market appears to be lost, American companies have no reason to lobby for access to that market.
And as their chips are replaced by local versions, they may wonder whether the West’s decision to continue supplying China with chip-making tools and chemicals is really in their interest.