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Huawei to dodge US sanctions with SMIC chip

(ATF) Chipmaker Semiconductor Manufacturing International (SMIC) has mass-produced a smartphone processor for Huawei Technologies, marking a breakthrough in mainland China’s push to boost its semiconductor industry, China Daily reported.

The news came ahead of a decision by the White House to tighten US restrictions on the company’s development of the products using American technology. 

Huawei’s chipset, the Kirin 710A, was produced through an advanced, 14-nanometer manufacturing process by the Shanghai-based chipmaker. It’s the first time that a mainland semiconductor company has commercialised the technology. 

The move also confirms that Huawei is shifting partial production of its self-designed chips to SMIC, away from Taiwan Semiconductor Manufacturing (TSMC), amid worries about tightened restrictions from the US government.

Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association, said that the Kirin 710A chip’s design, manufacturing, testing and packaging are all done by Chinese mainland companies.

SMIC Shanghai received Huawei smartphones last week with “Powered by SMIC” printed on the back.

“It is a step from zero to one,” Xiang said.

Hua Chuang Securities said in a research note on Tuesday that chip manufacturing is a crucial part of the semiconductor industry chain.

White House threat

The US Commerce department said it would “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain US software and technology”.

“This announcement cuts off Huawei’s efforts to undermine US export controls,” the Commerce Department said in a statement.

The US considers the Shenzhen-based telecom giant a national threat.

The measures threaten Huawei’s  access to TSMC’s production of its self-designed chips.

“In such a context, SMIC’s progress in 14 nm is very important,” the securities company said.

SMIC said earlier that it would expand its production capacity in 14nm manufacturing to 15,000 wafers per month by the end of the year. Wafers are the silicone dyes from which chips are struck.

The company said in its first-quarter financial report on Wednesday that revenue in the three months through March was a record high $905 million, up 35 percent year-on-year.

Huawei is also beefing up its own chip research and development capabilities. HiSilicon, its semiconductor arm, became the first Chinese mainland company to enter the Top 10 global chip rankings, taking 10th position in the first quarter, according to market research company IC Insights.

This comes as Washington toughens export controls of semiconductor technologies to China. 

According to a new rule released by the US Department of Commerce in late April, licences will be needed for US companies to sell certain items, including semiconductors, to Chinese companies that Washington thinks have ties to the military, even if the products are meant for civilian use. The rule will take effect on June 29.

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US semiconductor equipment makers Lam Research and Applied Materials have sent letters to their Chinese clients, asking them not to use their products to make chips for the military or military-civilian initiatives, Chinese media reported on Tuesday night.

Bai Ming, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, said, “the new restrictions will harm the US semiconductor industry”.

Lam Research said in a recent filing: “Our international sales could be materially and adversely affected by export license requirements and other regulatory changes.”

China accounted for 29% of Lam’s overall revenue for the nine months ended March 29, the company said.

“There is no assurance that we will be issued licenses that we may apply for on a timely basis or at all, which could limit our ability to operate and adversely impact our revenues in China,” Lam added.

In other news, China Mobile Guangdong and Huawei jointly announced that they have opened the world’s first enterprise private line service based on NG OTN (Next Generation Optical Transmission Network) technology, according to Huawei’s official website.

The move marked the start of a comprehensive upgrade of Guangdong Mobile’s smart private network, which is hoped to meet the differentiated dedicated line connection needs of large-, medium- and small-sized enterprises, accelerate the digital transformation of various vertical industries, and lay a solid foundation for the development of Guangdong’s digital economy.


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