SMIC to the rescue? Huawei shouldn’t hold its breath: experts · TechNode

As the US moves to cut Huawei off from global chip manufacturing, experts say the domestic market doesn’t offer a replacement. Flagship domestic semiconductor fabrication company SMIC can’t handle state of the art products, and itself is vulnerable to being disrupted by a US export ban.

The Chinese telecommunications equipment manufacturer and handset maker could be cut off from global chip manufacturing by a new regulation announced by the US Department of Commerce May 15. The regulation requires companies around the world to obtain licenses for sales to Huawei of semiconductors made with US technology.

Affected Huawei suppliers include Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker that produces high-end chip design for Huawei; Taiwan’s Win Semiconductors, which makes Huawei’s radio frequency chip designs; and South Korea’s Samsung Electronics, which ships memory and storage to the Chinese company.

Guo Ping, the rotating chairman of Huawei, told reporters Monday that the rule would “inevitably harm Huawei’s business to a great extent” and that the company is confident that it would find a solution soon.

“If Huawei finds no way around this and TSMC closely follows the US ban, this would be a severe blow to Huawei’s business—which is exactly what the US administration is aiming for,” Jan-Peter Kleinhans, director of the project IT Security in the Internet of Things at the Stiftung Neue Verantwortung, told TechNode.

READ MORE: Export controls and the rise of US-China techno-nationalism

An onshore option

On the same day the Commerce Department rule was made public, two Chinese state-backed funds announced they would inject a total of $2.2 billion into a domestic chipmaker, Shanghai-based Semiconductor Manufacturing International Corp. (SMIC). The investment is seen as China’s measure to foster chip-making capacity at home amid international supply chain uncertainty faced by Chinese companies. Experts say the company is the only domestic supplier comparable to TSMC.

SMIC also uses US-made equipment, but it is unlikely to cut ties with Huawei at Washington’s behest.

Huawei reportedly had started shifting some production of its chip designs from TSMC to SMIC by April, but the new export ban may drive Huawei to accelerate the transfer. The Nikkei Asian Review reported Monday that TSMC, a key manufacturer of chips designed by Huawei’s Hisilicon, has halted new orders from Huawei in response to Washington’s new rule change.

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Written by Aakash Malu


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