SMIC and Huawei are breaking barriers with 5nm chips despite US sanctions

• As per the Financial Times report, SMIC will mass-produce 5nm chips designed by Huawei, and is building new production lines in Shanghai.
• The chipmaker plans to utilize US and Dutch equipment for 5nm chip production.
• SMIC might expand 5nm chip production to Huawei’s Ascend 920 if the smartphone is successful. Ascend rivals Nvidia’s latest at 7nm.

When it comes to semiconductor technology, China’s ambition for self-sufficiency has become increasingly evident, notably propelled by its largest state-backed chipmaker, Semiconductor Manufacturing International Corp (SMIC), and tech giant Huawei Technologies. Despite facing years of sanctions from the US over their alleged ties to the Chinese military, both companies are steadfastly pushing forward, determined to advance chip technology and bolster China’s semiconductor capabilities.

Ultimately, their goal is to reduce dependence on foreign chip imports. SMIC has been at the forefront of the country’s semiconductor push, striving to close the technological gap with leading chip-producing nations. Despite facing sanctions and technical challenges, SMIC has made significant strides in advancing chip fabrication processes, with plans to mass-produce 5-nanometer chips in collaboration with Huawei.

A report by the Financial Times recently revealed that China’s leading chipmakers anticipate producing next-gen smartphone processors this year. “The country’s biggest chipmaker, SMIC, has put together new semiconductor production lines in Shanghai, according to two people familiar with the move, to mass produce the chips designed by technology giant Huawei,” the FT said.

SMIC is gearing up to mass-produce new-generation 5nm chips designed by Huawei, marking a significant milestone in China’s quest for chip independence. This collaboration underscores the resilience and determination of Chinese firms to overcome external challenges and establish themselves as key players in the global semiconductor market.

The move came when Beijing leveraged strategic partnerships and international collaborations to accelerate its semiconductor advancements. The country has forged partnerships with leading semiconductor companies and research institutions worldwide, facilitating technology transfer and knowledge exchange to bolster its semiconductor ecosystem.

However, China’s semiconductor ambitions have not been without challenges and controversies. For starters, China’s semiconductor industry still lags behind its global counterparts in some critical regions, such as advanced process technology and design capabilities. Achieving true technological sovereignty remains an uphill battle, requiring sustained investments, talent cultivation, and policy support. 

To top it off, the country has faced accusations of intellectual property theft, industrial espionage, and unfair trade practices, prompting scrutiny and backlash from the international community. 

What does SMIC have planned for its 5nm collaboration with Huawei?

The decision to advance chip production despite sanctions reflects China’s strategic imperative to reduce reliance on foreign technology and assert its technological prowess on the world stage. China has invested heavily in semiconductor research and development in recent years, aiming to close the technological gap with leading chip-producing nations such as the US and Taiwan.

So SMIC’s efforts to set up new semiconductor production lines in Shanghai signify a pivotal moment in China’s quest, especially by using Huawei’s expertise in chip design and the former’s manufacturing capabilities. Moreover, the collaboration between SMIC and Huawei highlights the synergy between state-backed enterprises and leading technology companies in China. 

Two sources familiar with the plans reveal tothe  FT that SMIC intends to utilize its current US and Dutch equipment inventory to manufacture more minor 5nm chips. This production line will manufacture Kirin chips developed by Huawei’s HiSilicon unit, slated for upcoming iterations of its flagship smartphones.

Despite trailing behind the cutting-edge 3nm chips, the adoption of 5nm technology signifies China’s semiconductor sector’s steady advancement amidst US export restrictions. “With the new 5nm node, Huawei is well on track to upgrade its new flagship handset and data center chips,” one person familiar with the plans told FT.

How will this advancement help Huawei?

For context, SMIC’s 7nm and 5nm chip production lines utilize American machines accumulated before the company faced US restrictions. Additionally, its fab includes ASML lithography machines acquired last year. However, the Dutch government’s recent revocation of export licenses for advanced machines has hindered ASML from selling to China.

“SMIC is facing a more significant roadblock for production expansion after the US and its alliance tightened export restrictions on advanced chipmaking gear,” according to the FT‘s source. “Still, the fate of China’s chip industry and its technological development in the coming years will depend on these production lines by SMIC.”

Huawei recently made waves with its Mate 60 Pro, boasting a 7nm processor that spurred a 50% surge in Chinese shipments in 2023. If successful for smartphones, SMIC’s 5nm production could extend to Huawei’s Ascend 920, narrowing the gap with Nvidia’s GPUs. Of course, the push for more advanced chips has resulted in added expenses. 

Sources close to Chinese chip firms revealed that SMIC charges 40 to 50% higher prices for products from its 5nm and 7nm nodes than TSMC. Additionally, SMIC’s yield, or the number of usable chips, is less than one-third of TSMC’s.

🇨🇳 SMIC is aiming to use its existing stock of US and Dutch-made equipment to produce more-miniaturized 5nm chips. The production line will make Kirin chips designed by Huawei’s HiSilicon unit and destined for new versions of its premium smartphones.

“With the new 5nm node,… pic.twitter.com/yAzWv6ymXJ

— Byron Wan (@Byron_Wan) February 6, 2024

Reaction to the Mate Pro 60 was spectacular. Just wait till Washington gets a load of this…

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