Chip wars: Huawei’s new smartphone breakthrough deals a major blow to US

Tech industry insiders are expecting the United States to ramp up restrictions on China’s semiconductor industry after Huawei’s launch of Mate Pro 60 smartphone late last month.

Huawei successfully side-stepped export controls imposed by the US and built a 7-nanometer semiconductor, a game-changing feature in its latest smartphone.

In October 2022, the US introduced widespread measures to throttle the supply of essential equipment and intellectual property to Chinese firms in a bid to block Beijing’s rise in the semiconductor value chain.

A key feature of those measures was to restrict China’s chip-making capability to 14nm.

A nanometer denotes the size of transistors - the backbone of microprocessors. The smaller the size of a transistor, the more of them can be squeezed into a chip, increasing the performance of the device. The latest iPhone 15 is powered by a 3nm chip.

“The US ignored loopholes due to the fact that many industry insiders benefit directly from selling more tools to China,” says Dylan Patel, a senior analyst at SemiAnalysis, a tech consultancy.

Patel and his colleagues were among the first to strip down a Mate Pro 60 smartphone and analyze its components. They released a detailed report on September 12 on its key features including the 7nm tech.

Semiconductor industry analysts already knew that Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chip maker, has acquired the know-how to make 7nm semiconductors.

But few people were expecting for the chips to be produced on a commercial scale and in a way that they can be used in a smartphone.

Huawei has released the phone silently without the usual marketing fanfare. The specifications on its box even played it down as they say it’s a 4G phone. But analysis in the last few days has revealed that Mate Pro 60 has 5G downloading speed.

The phone’s chip, called Kirin 9000S, was designed by HiSilicon, a subsidiary of Huawei. It was then produced by SMIC, a foundry, which is one of the largest in the world and competes with Taiwan Semiconductor Manufacturing Company (TSMC), Intel and Samsung.

The big leap

What has particularly interested semiconductor enthusiasts is the design of Kirin 9000S. A chipset has tens of millions of transistors and only a handful of companies can design them.

Under license arrangement Huawei uses Instruction Set Architecture (ISA) of the UK-based Arm to design integrated circuits. But engineering reviews found that some of the architecture on Kirin 9000S chips has been designed by Huawei itself.

“Arm licenses technology to Huawei around design, but Huawei also has its own design capabilities and does not need Arm's licensing, despite the fact they will continue to use the same ISA,” says Patel.

SMIC, a pure-play foundry or a fab, which manufactures integrated circuits designed and developed by other companies such as AMD and NVIDIA, has been a key target of the US sanctions.

Washington lobbied for months to convince Netherlands-based ASML to suspend sale of its deep ultra violet (DUV) photolithography machines to SMIC.

ASML has a near monopoly on the photolithography equipment, which is used to print complex integrated circuits on silicon wafers. On September 1, ASML announced that it will not deliver any new machines to SMIC from next year. But analysts say SMIC has already acquired enough of them to meet its needs.

“I think many people did not realize that SMIC has had some access to advanced American equipment and has had access to ASML’s DUV equipment until September of this year,” says Douglas Fuller, a professor at Copenhagen Business School and author of Paper Tigers, Hidden Dragons: Firms and the Political Economy of China's Technological Development.

“China is trying to build its own fabrication equipment industry and has not made much progress.”

ASML, which makes billions of dollars in revenue from China, was initially reluctant to comply with the US decision and dragged feet on the question of export restrictions.

Peter Wennink, ASML’s CEO, in a recent interview said isolating China’s tech industry is not viable.

“ASML is China's biggest cheerleader, due to the fact that they can make many billions of dollars from continuing to have ineffective sanctions,” says Patel of SemiAnalysis.

A major stumbling block for SMIC has been its inability to acquire ASML’s Extreme Ultraviolet photolithography machines. Without EUV equipment it becomes increasingly difficult for a foundry to produce advanced chips at the right price.

But it appears that SMIC has figured out a way to use ASML’s less sophisticated DUV machines to produce 7nm semiconductors.

As the first anniversary of October 7 US sanctions on China approaches, the question remains if the West has the ability to stop Beijing from making even more advanced semiconductors.

“The US has the arsenal to stop Huawei and SMIC, but the question is really whether they have the stomach to do so,” says Patel.