A high-ranking Huawei executive has reportedly made a rare admission that China’s ambitious semiconductor efforts may have peaked. On June 9, during the Mobile Computility Network Conference in Suzhou, China, Huawei’s Cloud Services CEO Zhang Ping’an voiced concerns about China’s inability to source 3.5nm chips because of U.S. sanctions.

Zhang pointed out that TSMC, based in Taiwan and therefore not subject to the U.S. sanctions, continues to increase its supply of 3.5nm semiconductors. “However, under U.S. sanctions, China has no way to secure these products,” he said.

The comments were reportedly a surprise to many in the industry since China has consistently reported confidence in the strength of its semiconductor growth. In May, the Chinese government announced a 65.6 trillion won ($47.5 billion) third fund to reinforce investment in the country’s semiconductor industry.

Huawei recently succeeded in mass-producing 7nm chips without using extreme ultraviolet (EUV) technology. This surprised the global semiconductor market and led to speculation that the chipmaker could soon mass-produce 5nm chips as well.

The restrictions the U.S. placed on sending manufacturing equipment and technology to China have prevented Chinese semiconductor tech from further advancement, though. Zhang noted that producing 3.5nm chips would require EUV technology, which China does not yet possess.

The nation is trying to develop the required technology on its own, but this is generally considered highly challenging because engineers need to circumvent U.S. and Dutch patents to succeed.

Given the difficulties China is facing from U.S. sanctions, Zhang believes Huawei and other manufacturers should make more effective use of the technology that is available. He said, "The reality is that we can't introduce advanced manufacturing equipment due to U.S. sanctions, and we need to find ways to effectively utilize the 7nm semiconductors."

The counterpoint to this is that some manufacturers are finding clever ways to work around the restrictions. Chinese DRAM maker CXMT circumvented U.S. sanctions on sub-18nm DRAM equipment by preparing to mass-produce 18.5nm DRAM. Mention has also been made of a “gray market” that allows Chinese firms to acquire U.S. equipment parts through unofficial procurement channels.

If China remains unable to produce more advanced semiconductors, it will likely try to continue growing its share of the legacy semiconductor market. Research firm Trend Force predicts that its share will increase from 29% in 2023 to 33% by 2027.

By: DocMemory
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