A senior Huawei official has reportedly made a rare admission that China’s ambitious semiconductor efforts may have peaked. Speaking at the Mobile Computing Network Conference in Suzhou, China on June 9, Huawei Cloud Services CEO Zhang Ping’an expressed concern that U.S. sanctions will prevent China from procuring 3.5nm chips.
Zhang noted that TSMC, which is based in Taiwan and therefore not subject to U.S. sanctions, continues to ramp up its supply of 3.5nm semiconductors. “But under U.S. sanctions, China has no way to secure these products,” Zhang said.
The comments reportedly came as a surprise to many in the industry, as China has consistently expressed confidence in strong semiconductor growth. In May, the Chinese government announced a third fund of 65.6 trillion won ($47.5 billion) to boost investment in the domestic semiconductor industry.
Huawei recently succeeded in mass-producing 7nm chips without using extreme ultraviolet (EUV) technology, surprising the global semiconductor market and raising speculation that the chipmaker may soon mass-produce 5nm chips as well.
However, further progress in China’s semiconductor technology has been hindered by restrictions imposed by the United States on the export of manufacturing equipment and technology to China, Zhang noted. Manufacturing 3.5nm chips requires EUV technology, which China does not yet have, he said.
The Netherlands is trying to develop the necessary technology itself, but this is generally considered very difficult because to succeed engineers would need to get around U.S. and Dutch patents.
Zhang believes Huawei and other manufacturers should make better use of available technology, given the challenges China faces because of U.S. sanctions. “The reality is that we can’t bring in advanced manufacturing equipment because of U.S. sanctions, so we need to find a way to make good use of 7nm semiconductors,” he said.
In response, some manufacturers are finding clever ways to circumvent the restrictions. Chinese DRAM manufacturer CXMT has circumvented US sanctions on sub-18nm DRAM equipment by preparing for mass production of 18.5nm DRAM. There has also been talk of a “grey market” that allows Chinese companies to obtain US equipment parts through unofficial procurement channels.
If China remains unable to produce more advanced semiconductors, it will likely continue to gain market share in traditional semiconductors, with research firm TrendForce predicting that China’s share will grow from 29% in 2023 to 33% by 2027.
