A person check his phone near an Apple logo outside its store in Shanghai, China September 13, 2023.
Aly Song | Reuters
Apple is facing various issues in China, with geopolitical risks mounting and the economy still not firing as many would have hoped.
But the most important challenge of all, in accordance with analysts, may very well be a resurgent Huawei after a purported major semiconductor breakthrough that flew within the face of U.S. sanctions.
The newest chip, made by China’s biggest semiconductor manufacturer SMIC, has sparked concern in Washington and raised questions on the way it was possible, without the corporate with the ability to access critical technologies.
But there may be also scrutiny on whether the method getting used to make these recent chips is efficient enough on a big scale to sustain a Huawei comeback.
What has happened to Huawei thus far?
What’s the large deal about Huawei’s recent chip?
Alongside Apple and Samsung, Huawei is one in every of only just a few corporations that has designed its own smartphone processor. This was done through the Chinese firm’s HiSilicon division.
The chip, nevertheless, was manufactured by Taiwan Semiconductor Manufacturing Co., or TSMC. U.S. export restrictions, which effectively barred Huawei from using American technology anywhere along the chipmaking process, meant the Chinese company could now not source its chips from TSMC.
The Taiwanese chipmaker is essentially the most advanced semiconductor manufacturer on the planet. There isn’t any Chinese company that may do what TSMC does. That is why shock waves were sent through the political and tech world when Huawei quietly released the Mate 60 Pro in China this month, with evaluation showing a chip inside made by SMIC.
Together with Huawei, SMIC is on a U.S. trade blacklist called the Entity List. Corporations on this list are restricted from buying American technology. Meanwhile, SMIC’s technology is seen as generations behinds the likes of TSMC.
So how could this have been done with the massive amount of sanctions on each Huawei and SMIC?
What we learn about Huawei’s chip
Huawei’s smartphone chip is named the Kirin 9000S, which mixes the processor and components for what appears to be 5G connectivity. 5G refers to next-generation mobile web that guarantees super-fast speeds. Huawei has not confirmed the phone is 5G capable, but reviews have shown the device is able to hitting download speeds related to 5G.
The semiconductor has been manufactured using a 7 nanometer process by SMIC, in accordance with an evaluation of the Mate 60 Pro by software company TechInsights.
The nanometer figure refers to the scale of every individual transistor on a chip. The smaller the transistor, the more of them might be packed onto a single semiconductor. Typically, a discount in nanometer size can yield more powerful and efficient chips.
The 7 nm process is seen as highly advanced on the planet of semiconductors, despite the fact that it just isn’t the most recent technology.
For years, SMIC struggled to make 7 nm chips. That is partly since it couldn’t get its hands on a really expensive and crucial device called an extreme ultraviolet (EUV) lithography machine. These are made by Dutch firm ASML, but the corporate has been restricted by its government from sending these machines to China.
Many thought this may hold back SMIC’s ability to make advanced chips. Nevertheless it seems to have made it occur without these tools.
In a blogpost this month, Dan Hutcheson, vice chair of TechInsights, said the 7 nm chip “demonstrates the technical progress China’s semiconductor industry has been in a position to make without EUV lithography tools.”
Huawei was not immediately available for comment regarding this story when contacted by CNBC.
Is that this an enormous deal or simply posturing?
From a technology perspective, it is important that SMIC has manufactured chips using a 7 nm process without ASML’s EUV machines.
Pranay Kotasthane, deputy director of the Takshashila Institution, told CNBC that it is probably going that equipment used for older manufacturing processes are being “repurposed” for these more advanced chips. But he believes the method is probably going being undertaken with “lower efficiency” than if SMIC were to make use of cutting-edge equipment.
And that is a key point. While SMIC is in a position to create 7 nm chips, it’s unclear how efficient, profitable and sustainable that’s on a much bigger scale. A closely watched metric is “yield” — the variety of chips made out of a selected wafer.
If a chip manufacturer’s yield is low, then the method just isn’t seen as efficient and might be costly. While the yield of SMIC’s 7 nm process for Huawei chips just isn’t known, it’s “probably low,” Kotasthane said.
It’s a waiting game to see if SMIC can produce the variety of chips that Huawei requires at a profitable scale.
What’s going to the U.S. do next?
The technology advancement has actually rattled Washington. The U.S. Department of Commerce issued a press release this month saying it’s seeking to get more information on Huawei’s chip.
SMIC’s 7 nm manufacturing process has also exposed a number of the weaknesses within the U.S.’ export restriction strategy, which may lead to further curbs.
“There will probably be pressure on the U.S. to reconsider its export controls strategy, which was based on the idea that controls would prevent Chinese corporations from producing advanced-edge chips, while the business-as-usual approach would proceed on the trailing-edge nodes. It’s increasingly becoming clear that this distinction doesn’t work in point of fact,” Kotasthane said.
He added that Washington may have a look at other areas of the chip design and manufacturing process to enact further restrictions.
Apple’s China headwinds grow with Huawei chip
The Wall Street Journal reported this month that Chinese central government staffers had been banned from using iPhones and other foreign-branded phones for work and even prohibited them from being brought into the office.
China’s Ministry of Foreign Affairs said last week there weren’t any regulations prohibiting the acquisition and use of foreign phones.
As geopolitical tensions between the U.S. and China proceed to bubble under the surface, it is maybe a possible Huawei resurgence that poses the most important threat to Apple.
“It’s expected that Huawei will pose a much bigger challenge to Apple in China than the geopolitical issue,” Will Wong, a senior research manager at IDC, told CNBC.
“It is because Huawei not only has the identical premium brand image as Apple but additionally is a national pride in China.”
Apple is seen as a high-end smartphone maker and Huawei had directly competed with the U.S. firm in China for years. But Huawei’s sales fell off a cliff when it couldn’t equip its smartphones with 5G technology and the most recent chips.
Any form of resurgence on this area, as appears to be the case with the Mate 60 Pro, could make Huawei’s recent phones a sexy option again for Chinese buyers.
“The most important threat from Huawei is its continuous development in technology, not only in chips but additionally in recent form aspects like foldables,” Wong added.
