A man checks his phone near an Apple logo outside an Apple store in Shanghai, China on September 13, 2023.
Apple is currently facing multiple challenges in China, including escalating geopolitical risks and an underperforming economy. However, analysts believe that the biggest challenge for the company might come from Huawei, which recently achieved a major semiconductor breakthrough despite U.S. sanctions.
The new chip, manufactured by China’s largest semiconductor producer SMIC, has raised concerns in Washington about how it was developed without access to critical technologies. Additionally, there are doubts about whether the chip-making process employed by SMIC can support a successful comeback for Huawei on a large scale.
So far, Huawei’s smartphone processors have been designed by its division called HiSilicon, but they were manufactured by TSMC, a Taiwanese chipmaker. However, due to U.S. export restrictions, Huawei can no longer source its chips from TSMC. The fact that Huawei quietly released the Mate 60 Pro in China with a chip made by SMIC has caused shockwaves in the political and tech world.
The chip manufacturing process used by SMIC is seen as outdated compared to TSMC’s highly advanced technology. It is not clear how Huawei was able to produce the Kirin 9000S chip for the Mate 60 Pro using SMIC’s 7 nanometer process when SMIC itself is on the U.S. Entity List and faces restrictions on accessing American technology.
Data suggests that the 7nm chip produced by SMIC for Huawei is capable of 5G connectivity, although Huawei has not confirmed this. The 7nm process is considered advanced in the semiconductor industry, but it is not the latest technology available.
For years, SMIC struggled to manufacture 7nm chips due to the absence of expensive EUV lithography machines. However, it seems that SMIC has found a way to make advanced chips even without these tools. The efficiency, profitability, and scalability of SMIC’s 7nm process for Huawei chips remain uncertain. A key metric to watch is the yield, which indicates the number of functional chips produced from a wafer. The low yield of SMIC’s process suggests that it may not be efficient or cost-effective on a larger scale.
The U.S. Department of Commerce has expressed concern about Huawei’s new chip and is seeking more information. The success of SMIC’s 7nm manufacturing process has exposed weaknesses in the U.S.’s export restrictions and may lead to further curbs. The geopolitical tensions between the U.S. and China could potentially be overshadowed by a resurgence of Huawei, which is seen as a bigger threat to Apple in the Chinese market.
According to experts, Huawei’s continuous technological development, including advancements in chips and new form factors such as foldables, poses the greatest threat to Apple’s position in China. Huawei’s ability to offer 5G technology and the latest chips in its smartphones could make them more appealing to Chinese buyers once again.
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