SMIC Benefits From Extended Huawei Ban

As Trump ramps up the tech war, China ramps up R&D.

Jennifer Chan
    May 14, 2020 11:40 AM  PT
SMIC Benefits From Extended Huawei Ban
author: Jennifer Chan   

Huawei Technologies will have to use domestic chips for another year as the Trump administration has extended the ban on doing business with the Chinese smartphone giant.

In May 2019, the U.S. President Donald Trump placed Huawei on a blacklist that forbade American companies to provide it with technology on national security grounds. This cut off the supply of parts to the Chinese giant from U.S. makers including Qualcomm (Nasdaq: QCOM) and Intel (Nasdaq: INTC); Both companies unsuccessfully lobbied the Commerce Department to ease the ban. 

The Trump administration didn't stop there. Earlier this year, as Reuters reported, Washington considered new measures that would force foreign chipmakers that utilize U.S. parts to get a license before supplying Huawei. That would include the world 's largest independent foundry, Taiwan Semiconductor Manufacturing Co. (TSMC).

Huawei has been dealing with this the best and the only way it can – by improving its own technology. That means turning to China's top chipmaker, SMIC, or Semiconductor Manufacturing Industry Corp. (HKEX: 0981).

In fact, this week, Shanghai-based SMIC revealed that it's now producing the Kirin 710A for Huawei on its 14nm FinFET process. Building chips in-house was a first for Huawei's chip unit HiSilicon, a major milestone both for the company, and for SMIC.

Tech news platform ExtremeTech said, "Neither the Kirin 710 or SMIC's 14nm FinFET process are particularly noteworthy in and of themselves." Intel delivered its 14nm silicon back in 2014.

As of December 2019, China's semiconductor technology was three to five years behind TSMC, according to Bloomberg. However, with a little help from Trump's tech war and Beijing-borne incentives, the industry is motivated to ramp up R&D, potentially shortening that timeline significantly. 

In addition to American chips, Huawei cannot provide for Google apps in its Android smartphones. Instead, the giant had to build an alternative, Huawei Mobile Services Core and Huawei AppGallery, for its smartphones, including Honor phones. For this reason, XDA-Developers News said the Huawei Mate 30 Pro – while "objectively one of the best hardware releases" of 2019, would not be a good choice for everyone. Currently, the U.S.-made components in Huawei's Mate 30 represent 1%, while Chinese parts formed 42%, according to Nikkei Asian Review. 

The U.S. ban has been extended until May 2021.