Huawei’s Struggle to Keep Up: U.S. Sanctions Threaten China’s Semiconductor Ambitions

Huawei, China’s largest telecommunications equipment company, is struggling with advanced chip production due to U.S. technology export controls. This raises concerns about whether China’s semiconductor ambitions will waiver.

On Tuesday, Bloomberg News cited anonymous sources reporting that Huawei is developing two next-generation Ascend processors to counter NVIDIA’s advanced accelerators, designed with 7nm (nanometer) technology. Industry experts point out that 7nm technology has been used for several years and is no longer considered cutting-edge.

Due to U.S.-led sanctions, Huawei cannot import the latest extreme ultraviolet (EUV) lithography equipment from the world’s top semiconductor equipment manufacturer ASML. As a result, Huawei may have to produce most of its flagship products using outdated technology until 2026 as it experiences stagnation in its technological advancement.

China’s strategy to catch up with the U.S. in AI and advanced semiconductors could be hindered if Huawei underperforms. The ongoing U.S. sanctions have successfully impeded China’s technological progress. Bloomberg highlighted that one of the significant obstacles to Huawei’s technological advancement is the inferior quality of Chinese equipment. China hoped to foster a semiconductor ecosystem by having domestic manufacturers adopt local equipment, but the ban on exporting essential EUV equipment has created challenges.

The technology gap with the U.S. could widen further if Taiwan’s TSMC (partner of the U.S. and chip manufacturer for companies like Apple and NVIDIA) starts producing 2nm chips next year. The 2nm chips are three generations ahead of 7nm. Huawei’s key partner, Semiconductor Manufacturing International Corporation (SMIC), struggles to produce 7nm reliably at scale. Bloomberg reported that “SMIC’s 7nm production line is grappling with low yields and reliability issues. There is little guarantee that Huawei will secure sufficient smartphone processors and AI chips in the coming years.”

Huawei plans to launch its next flagship smartphone, the Mate 70, at the end of this month. However, while accepting pre-orders, Huawei has not disclosed hardware specifications. Bloomberg noted this as Huawei’s struggle with advanced technology. Despite the U.S. sanctions, some speculate that Mate 70 would feature the application processor Kirin 9100 with 6nm chips.

This speculation arose when Huawei alleviated public concerns by releasing the Mate 60, which featured a self-developed 7nm chip.