Proposed U.S. rule change forces Huawei to make a shift in chip production

Proposed U.S. rule change forces Huawei to make a shift in chip production
Currently, a component made outside of the U.S. that contains 25% of American technology or more is under the export control of American regulators. This means that a chip made using 25% or more of U.S.-origin technology cannot be sold to Huawei because of the U.S. supply chain ban. And the U.S. is reportedly looking to tighten the screws as the Commerce Department weighs dropping that threshold to 10%. If such a change is made, it would be the first in 30 years and would hit Huawei very hard.

Expecting that such a change will be made, MyDrivers reports today that Huawei has directed its HiSilicon chip unit to order the production of 14nm chips from China's leading foundry, SMIC. The company usually turns to the world's largest independent foundry, TSMC, to produce its chips. HiSilicon will still have to use TSMC to produce its cutting edge 7nm chipsets like the Kirin 990 and its 5nm sequel expected to be called the Kirin 1020.

SMIC just started turning out 14nm FinFET chips during the third quarter of 2019

The process numbers refer to the number of transistors that can fit into a small dense location; the smaller the process node, the higher the number of transistors that can be packed inside an integrated circuit. More transistors make a chip more powerful and energy-efficient. For example, the Kirin 990 5G chip used to power the Huawei P40 series carries more than 10.3 billion transistors. SMIC first started mass production of 14nm FinFET chips during last year's third quarter. The Trump administration has stymied efforts by the chip manufacturer to make its chip production more cutting edge.

As we told you last week, U.S. officials met with the Dutch government and successfully talked them into blocking an export license that would have allowed SMIC to take delivery of a key machine. Dutch company ASML is the global leader in selling lithography equipment to the semiconductor industry and SMIC agreed to pay $150 million for an EUV machine. EUV, or extreme ultraviolet lithography, allows for a more precise pattern to be made on wafers. Since these patterns are used to determine the placement of transistors inside an IC, the technology will help chip makers fit even more transistors inside their components leading to the creation of even more powerful and energy-efficient chips. Starting in the second half of this year, TSMC will manufacture 5nm chipsets with Apple's A14 Bionic and Huawei's Kirin 1020 to be among them.

While SMIC is expected to produce some chips belonging to Qualcomm's Snapdragon 400 series using the 14nm process, it isn't known which HiSilicon chips it is farming out to SMIC. Most analysts believe that the components are going to be used for a Huawei smartphone or tablet.

In a related story, Bloomberg reports today that TSMC has hired Peter Cleveland, a former Intel lobbyist. The Taiwan based company is trying to get a handle on any potential impact on its chip manufacturing business resulting from the U.S.-China trade dispute. Back in November, Taiwan denied a report claiming that the Trump administration was trying to get the country to pressure TSMC into dropping Huawei as a customer. Huawei is the foundry's second-largest customer after Apple. At the time, Kolas Yotaka, a spokeswoman for the Taiwan Cabinet, said, "Our government has not received any request from the U.S. government to stop TSMC from supplying Huawei."

Huawei is considered a national security threat in the U.S. because of the possibility that it could be asked to spy on behalf of the Chinese government. In the middle of May, the manufacturer was placed on the Commerce Department's entity list which blocks Huawei from accessing its U.S. supply chain. In 2018, the company spent $11 billion procuring parts from the states.



1. meanestgenius

Posts: 22805; Member since: May 28, 2014

Huawei is going to do whatever is necessary for it to continue to thrive in its businesses, while minimizing the impact to its bottom line as much as possible. As there doesn't seem to be an end to this BS political propaganda ban, Huawei will just continue to adapt to overcome, like it's been doing. There will be damage done to Huawei in the short term, but in the long term, they will be a thriving company that is much more self reliant. They have the resources to beat this.

3. jiangqiushi

Posts: 44; Member since: May 28, 2019

well said. The US can try anything to stop the development of Chinese tech in the short term, in the longer term, they will regret.

8. Venom

Posts: 3973; Member since: Dec 14, 2017

Now that's just propaganda. I don't see you or the other Huawei apologists pointing fingers at China for trying to stifle innovation and give Chinese companies an unfair advantage. Huawei has stolen ideas and designs from other companies while people continue to think that they are innovating and pushing the boundaries when they are doing nothing more than imitating.

11. meanestgenius

Posts: 22805; Member since: May 28, 2014

No, it’s not propaganda. And I don’t see you or any other member of the Xenophobic Huawei Hate Brigade pointing fingers at the U.S. government for doing exactly what the Chinese government has done. Furthermore, Huawei DOES NOT equal the Chinese government. They are two different entities entirely. ALL OEM’s have “stolen” ideas and designs from one another, or did you forget how your precious Google has made its Pixels in the image of the iPhone? Just look at that camera placement. Huawei has innovated much more than them, and have continued to push the boundaries in tech, such as networking equipment, camera tech on a smartphone, and smartphones in general. There is a reason why they are the #1 global Networking vendor and the #2 global smartphone vendor.

13. meanestgenius

Posts: 22805; Member since: May 28, 2014

Jiangqiushi, Absolutely agree.

2. Alcyone

Posts: 613; Member since: May 10, 2018

*opinion* I'm sure the repetitiveness of explaining to workings on the chip has been cut and pasted. Numerous times at that. Surely, I'm probably not the only one that feels its getting old, being mentioned in every single article that mentions "chip". People know how to use Google.

5. Cicero

Posts: 1159; Member since: Jan 22, 2014

This is because they need the number of words present in an article to be properly indexed by Google search.

9. Venom

Posts: 3973; Member since: Dec 14, 2017

Definitely not a bs political agenda incorrectly assumed. Huawei is a shady company that has been thriving off of other's innovation and hard work. The only reason why Huawei is in the position they are in is because of the Chinese government.

12. meanestgenius

Posts: 22805; Member since: May 28, 2014

It’s absolutely BS political propaganda, and you are incorrect to say it’s not, especially since the U.S. government has yet to provide any solid evidence of Huawei’s wrongdoings. They are in the position they are in through hard work and innovations, and it shows.

10. ScottsoNJ56

Posts: 157; Member since: Oct 01, 2017

I know some of us have went round and round on Huawei and if they could possibly spy. I don't think the US has shown why it believes this. This part of another article is stating that the US government is considering asking the Universal Service Fund (USF) to rip out existing Huawei and ZTE equipment. I don't think they would go to this sort of an extreme to make a point. "Besides warning its allies about Huawei, the U.S. FCC recently voted unanimously to block purchases of networking gear from Huawei and ZTE by the Universal Service Fund (USF). Managed by the regulatory agency, the fund spends $8.5 billion annually on technology that provides rural and low-income Americans with access to the internet. The ban doesn't cover older 2G, 3G and 4G networks belonging to rural carriers that took advantage of Huawei's lower prices. However, the FCC is considering a rule that would require these small wireless providers to rip out Huawei and ZTE equipment from their networks. The FCC has asked these carriers for estimates on how much it would cost them to do this, but the agency believes that such a task might cost $1.89 billion over a two-year period. Huawei said back in November that it will sue in an effort to overturn the FCC's ban on purchasing Huawei equipment with USF funds."

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