Microchip wars: the intriguing Chinese response

Microchip wars the intriguing Chinese response

The second life of Huawei. This is the expression chosen by L’Express, a few weeks ago, to evoke the revival of this flagship of Chinese tech in the automobile or even energy. The firm had recorded a sharp contraction in its turnover – more than 30 billion euros less between 2020 and 2021 – after heavy US sanctions pulverized its smartphone division.

These attacks, instigated by Donald Trump, are currently continuing under the Biden administration. They deprive China of several advanced American technologies and more particularly target the supply of electronic chips, or semiconductors, among the most sophisticated. Those that equip military equipment, supercomputers to develop artificial intelligence, and therefore, state-of-the-art mobile phones. Huawei’s descent into hell in this sector, falling by 17.6% of market share at the global level in 2019, behind the leaders Samsung and Apple, to only 2% in 2022, is often presented as the symbol of efficiency. American measures in this regard. She may not be anymore.

The recent release of the Mate 60 Pro has a strong taste of revolt. This new 5G model from Huawei, exclusively available in China, embeds for the first time since the execution of the sanctions a cutting-edge chip manufactured locally by the founder Smic. The performance of this material is generally measured by the fineness of engraving of the transistors that compose it. Analyzed by the reference platform in the field of semiconductors, TechInsights, the “HiSilicon Kirin 9000S” chip would have followed a manufacturing process in 7 nanometers N + 2, with performance close to the 5 nanometer process. A technicality comparable to that observed on Apple smartphones (iPhone) marketed around 2018, notes the washington post.

Nothing revolutionary therefore, the next generation of the Apple brand could even contain 3 nanometers, thanks to the Taiwanese TSMC, the former supplier of Huawei. But this know-how is unprecedented for China, which breaks the glass ceiling limiting its production so far to 14 nanometers. Smic, whose stock price has gained more than 10% since the Mate 60 Pro announcements, did not comment on this major technological leap. Contacted by L’Express, Huawei France did not wish to comment on this either.

China is flaunting…

Behind these silences, the signal is clear. “The trade war is a failure. If the United States maintains an advantage in the high-tech sector, the Chinese people’s determination to catch up despite the pressure, as well as a strong sense of moral conviction, are things that the United States cannot ignore. It also shows that while the measures taken by the United States may cause us some problems in the short term, in the long term this war is not favorable to them”, welcomed the GlobalTimesthe Chinese state press.

The timing, too, reinforces the message: the Mate 60 Pro was made official while Gina Raimondo, the American Secretary of State for Commerce, began a delicate visit to Beijing. “This is a symbolic victory for China, because all the players involved in the creation of this chip – HiSilicon, Huawei and Smic – are on the list of companies specifically targeted by the sanctions”, remarks Mathilde Velliet, researcher at the ‘Ifri (French Institute of International Relations) and specialist in Sino-American relations.

Stifled by the United States in the chip war, China is not on its first counter-attack. Among the most notable: the exclusion of the American semiconductor champion Micron from strategic markets on its soil last May. And more recently, since August 1, the restriction on the export of two rare metals, germanium and gallium, widely used in the development of electronic components. But the announcement of the Mate 60 Pro is probably the one that worries Washington the most. “It is a reminder of the risk posed by the sanctions: that of encouraging the Chinese to more independence and autonomy”, continues Mathilde Velliet.

At the end of 2022, China announced a $140 billion plan in semiconductors. The Communist Party returned to its pockets on Tuesday, September 5, with a new effort of 38 billion dollars with the aim of acquiring high-level machines. Note that Huawei, in its “survival” mode, still devotes nearly 25% of its turnover to research and development. In 2022, the firm was also the main filer of international patents with 7,689 applications. “China has put resources into human recruitment, by seeking key skills in Asia, at Samsung or TSMC, adds Elena Barbarini, director of the department devoted to semiconductors within the French analysis company Yole Group. Many Chinese also went to train directly in the United States, in California.” This excess of energy and resources now seems to be bearing its first fruits.

… but the United States always runs faster

At the risk of offending the United States? In the washington posthistorian Chris Miller, author of the essay Chip Wars (The Flea War, in VF), believes that this event “will intensify the debate in the capital on the need to tighten restrictions”. But the outcome remains uncertain. “A balance must be struck between the impacts these measures will have for their own companies, such as Nvidia or Intel, which continue to work with China, and ensuring that this rival does not catch up technologically,” deciphers Emilie Jolivet, who also works on these subjects within Yole Group.

Several elements plead rather for a moderate reaction from the United States. The Mate 60 Pro is already out of stock, hinting at limited chip availability. Little information has leaked out about its use and reliability. “It is too early to say whether China will be competitive on the design of this kind of high-end chip. In addition, the United States already imposed, on August 9, new restrictions on outgoing investments in Chinese technologies. The latter are not yet felt in the country”, observes Mathilde Velliet.

Ultimately, the United States and its allies are always running faster. And for a while longer. Deprived of “extreme ultraviolet” (EUV) lithographic machines – the reference material in the industry, supplied by the Dutch ASML -, China cannot hope to reach 3 and 4 nanometers in the near future. The delay is “in years”, estimate the experts of Yole Group. Even with massive investments. Semiconductor design is as meticulous as it is slow. “Smic has been aiming for this milestone of 7 nanometers since 2018”, recalls Emilie Jolivet. The announcement of the Mate 60 Pro is both a symbol of China’s thwarted destiny and its perseverance.