Despite US efforts to "block" it, China's largest chipmaker still reaps success

Over the past few months, China's largest chipmaker - SMIC - has been working hard to produce advanced chips, despite US sanctions.

Bất chấp Mỹ nỗ lực 'ngáng đường', nhà sản xuất chip lớn nhất Trung Quốc

SMIC is setting up a new production line to produce 5-nanometer chips for Huawei. (Source: BBC)

There are still some major challenges for China as it strives to become more self-reliant in the semiconductor industry, as questions surround the long-term viability of its latest advances, according to CNBC .

SMIC's efforts

Last year, US-sanctioned Chinese tech giant Huawei launched the Mate 60, a smartphone with 5G connectivity and chips.

The Mate 60 uses a new 7-nanometer chip technology manufactured by a Chinese chip foundry company, SMIC (Semiconductor Manufacturing International Corp).

SMIC is China's largest contract semiconductor manufacturer. Its 7-nanometer process is considered "very advanced" in the semiconductor world , although it is not the latest technology.

SMIC is setting up a new production line to produce 5-nanometer chips for Huawei, the Financial Times reported recently, signaling further progress for China's largest chipmaker.

The tech rivalry between the world’s two largest economies continued to heat up last year, with Washington designing sanctions to slow Beijing’s ability to produce the world’s most advanced chips.

Specifically, in October 2023, the US introduced rules restricting the export of chips made with US tools to China, as well as any semiconductors designed for artificial intelligence applications.

The rules also restrict the ability of US citizens to assist in the “development or production” of chips at certain manufacturing facilities in China.

Washington is also pressuring other countries to impose similar restrictions. One of the biggest moves has been from the Netherlands, which last year formally imposed export restrictions on advanced semiconductor manufacturing equipment.

The Netherlands is home to ASML, a maker of extreme ultraviolet (EUV) lithography machines, a key tool for making the most advanced chips at scale and at low cost. Since 2019, ASML has been banned by the Dutch government from selling advanced EUVs to Chinese customers.

China's challenges

Without EUV tools, SMIC will have difficulty creating 7-nanometer and smaller chips, or at least it will cost more, experts say.

So when the Huawei Mate 60 launched last year with a 7-nanometer chip, a lot of people were surprised.

SMIC may be using old equipment to make advanced chips, an expert told CNBC .

According to the Financial Times, SMIC is aiming to use its existing semiconductor equipment inventory produced in the US and the Netherlands to produce 5 nanometer chips.

“SMIC is now working very closely with both domestic toolmakers, leveraging its existing advanced lithography equipment platform and drawing on other external expertise to continuously improve productivity,” said Paul Triolo, at consultancy Albright Stonebridge.

So for now, SMIC can continue to improve its capabilities and yields at 7 nanometer and soon 5 nanometer for a small number of customers, mainly Huawei."

Still, experts say using old equipment to create advanced chips poses some major challenges.

SMIC is charged 40% to 50% more for products from its 5-nanometer and 7-nanometer manufacturing processes than TSMC, the Financial Times found.

TSMC is the world's largest and most advanced contract chipmaker, manufacturing chips for leading technology companies such as Apple, Nvidia, AMD and rival Intel.

“SMIC and China can continue to ‘throw money’ at this process, but ultimately, costs will continue to rise,” said Pranay Kotasthane, chair of the high-tech geopolitics program at the Takshashila Institute. “SMIC can overcome its current yield issues by investing more money.”

Source