• By Lin Liang-yang 林良陽

Chinese telecom giant Huawei Technology Co’s launch of its new Mate 60 Pro and Mate 60 Pro+ smartphones must be among the most attention-grabbing events of the past couple of weeks. Tests show that the data speeds of the devices are up to 5G level and they can make satellite calls. Chinese Internet commentators see these new models as heavyweight contenders for Huawei’s market resurgence.

Chinese state media have made the new phones a focus of propaganda, saying that even watertight technology restrictions imposed by the US cannot impede China’s independent scientific and technological development. The media are calling the new phones an “odds-on favorite.”

The main reason the new phones have triggered discussions in global media has to do with Huawei’s use of the Kirin 9000S chip, which is thought to be made by China’s Semiconductor Manufacturing International Corp (SMIC) using 7-nanometer process technology. In other words, it is an advanced chip independently produced by a Chinese manufacturer using a self-developed advanced process, which would mark an important milestone in China’s technological development.

However, this does not mean that the US’ technology restrictions are having no effect.

The US’ main strategic idea for impeding China’s development of advanced manufacturing processes is based on establishing a “Chip 4 plus Netherlands” alliance, under which the US would align with Taiwan, Japan, South Korea and the Netherlands to contain China and prevent it from making breakthroughs.

Under such circumstances, China would not be able to buy extreme ultraviolet (EUV) lithography machines, which are only made in the Netherlands, it would be unable to obtain upstream materials, equipment and special-purpose chemicals from Japan, and it would not be allowed to commission Taiwanese or South Korean manufacturers to produce advanced chips, or to buy US electronic design automation software and related advanced equipment.

SMIC’s inability to obtain EUV lithography machines from Dutch manufacturer ASML prevents it from producing advanced wafers at a more efficient commercial scale. SMIC makes its 7-nanometer wafers using a deep ultraviolet lithography machine. This is a transitional method dating from before EUV. It is a slow, low-yield and expensive process.

Given these downsides, the selling price of the Mate 60 Pro cannot reflect the real cost of production. If the costs are either absorbed by Huawei or subsidized by the Chinese government.

An EUV machine is an extremely sophisticated piece of equipment. Its more than 100,000 components are sourced from more than 800 suppliers around the world. Such a complete supply-chain ecosystem cannot be built overnight.

For China to build such a huge ecosystem to successfully develop ultra-high-precision and complex EUV machines would be a difficult task that it could never accomplish in the short term.

Unless there has been a scarcely imaginable paradigm shift in technological development, SMIC’s inability to obtain EUV equipment under the technological restrictions imposed by the US and its allies might mean that the 7-nanometer process will be a technological limit for Chinese semiconductor manufacturers.

If Huawei cannot continue to develop more advanced devices, in the long run, it would find it hard to compete with other mainstream manufacturers.

However, SMIC’s 7-nanometer semiconductor process technology breakthrough is highly significant from the perspective of military development. When it comes to national defense, the production of weapons generally does not need to take cost into consideration.

Chips manufactured using the 7-nanometer process are an important foundation for the production of 5G communications and networking equipment, and of supercomputers and artificial intelligence devices. Although Chinese manufacturers currently cannot use Taiwan Semiconductor Manufacturing Co’s 4-nanometer process, as Nvidia Corp does to make its A100 and H100 graphics processing units, it is fair to say that China has become one of the few countries in the world whose semiconductor technology includes its own advanced chip manufacturing processes, and this is significant with regard to military development.

The US should pay more attention to what happens and think carefully about how to respond.

Lin Liang-yang is an associate professor in National Kaohsiung Normal University’s Department of Business Management.

Translated by Julian Clegg