Huawei has had an eventful few years. Following initial struggles with US trade sanctions, the Chinese company has experienced a surprise resurgence in the mobile industry, thanks to the development of homegrown processors that are just two generations behind the competition. The Chinese government has also allocated billions of dollars to bolster its silicon industry, enabling Huawei to work towards a self-sufficient chip network. These developments suggest that former President Donald Trump’s efforts to stifle Huawei may have inadvertently accelerated China’s semiconductor development.
The conflict between Huawei and the US began in May 2019 when the Commerce Department added the company to its Entity List due to concerns about surveillance and links to the Chinese state security. This move meant that Google could no longer provide Android support to Huawei, leading to the company’s adoption of HarmonyOS two years later. In November 2019, the FCC banned carriers from purchasing Huawei and ZTE networking gear with government subsidies. The following March, Trump signed a bill to reimburse the replacement of Chinese gear, leading to Huawei’s attempts to sue the FCC and subsequent market share decline.
The tech war escalated in May 2020 when the US further restricted Huawei’s access to American equipment and software. This restriction prevented companies like TSMC, Samsung, and SK Hynix from supplying chips to Huawei. As a result, Huawei had to rely more on local chip makers like SMIC and Shanghai IC R&D Center, resulting in a significant downgrade in processor capabilities. Nonetheless, Huawei’s spin-off brand, Honor, has been able to maintain a strong market position in China since being sold in November 2020.
China’s investment in the chip industry has paid off, with SMIC achieving a 7nm breakthrough in August 2022, faster than TSMC or Samsung. Bloomberg’s investigation suggests that Huawei’s self-sufficient chip network may have been aided by a Shenzhen city government investment fund, enabling the company to access advanced lithography technology and hire former ASML employees to develop its latest processor. Benchmarks indicate that this processor’s performance is on par with Qualcomm’s Snapdragon 888, suggesting that it is about two generations behind the leading competition.
In a surprising move, Huawei recently launched the Mate 60 and Mate 60 Pro smartphones without any prior announcement, coinciding with a visit from the US Commerce Secretary to China. This move has raised questions about special orders. Despite these developments, China’s semiconductor industry continues to face significant challenges, with thousands of chip-related companies closing down while new ones emerge. The US-China tech war extends beyond chips to other sectors, including electric vehicles and batteries, with potential implications for the global market.