Why it matters: The big news in certain circles last week was the story about Huawei’s new flagship phone, the Mate 60, and the seemingly miraculous Kirin 9000s chip that powers it. This article has caught everyone’s attention as it appears to raise questions about the effectiveness of the US government’s restrictions on Huawei and China’s access to advanced manufacturing processes.
At this point we still know very little about the chip. The Internet is full of press reports about the chip, but they all seem to refer to a series of benchmarks run by Chinese bloggers and a teardown from a reputable company TechInsights. They confirmed that SMIC’s Kirin 9000 appeared to be manufactured using the 7nm process. And all benchmarks show that the chip is competitive, if not quite at the cutting edge of performance. How was Huawei able to circumvent all the sanctions and does that mean they aren’t working?
First we need a plausibility check. We really don’t know how good this chip is. Benchmarks only go so far when describing the real-world performance of a phone, and it is possible that the phone may not perform quite as well in actual use.
Guest author Jonathan Goldberg is the founder of D2D Advisory, a multifunctional consulting company. Jonathan has developed growth strategies and alliances for companies in the mobile, networking, gaming and software industries.
Second, before the raid, Huawei’s chip subsidiary HiSilicon was very good at its job, its modems and application processors were almost the best in the industry, outperforming Qualcomm and giving Apple a lead. So their ability to design this chip is not the surprise. The surprise was that they were actually able to get someone to make it for them.
We know that Huawei has invested heavily in fabs in recent years. We’ve seen signs of this in their investments in third parties, but it’s also reasonable to assume that they’ve invested a lot of time and money working with SMIC engineers, efforts that aren’t publicly flaunted. Crucially, we don’t know what the yield of this chip is or whether it is even remotely profitable for SMIC.
SMIC was tied to DUV (deep ultraviolet lithography) machines and cut off from ASML’s EUV machines by US measures. Their 7nm process is probably the limit of what they can produce without access to EUV. And let’s not forget that terms like “7nm” are marketing terms. In terms of actual comparisons, what matters most is transistor density, and by that metric this source claims it’s SMIC about 10% behind what TSMC refers to as 7nm. The likelihood that SMIC will actually have difficulty building these parts and lose a lot of money in the process is non-zero. (Again, we may never see this in their public accounts, as someone somewhere is probably subsidizing this work.)
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Most people assume that SMIC pushes the boundaries of what DUV can do. Unless Huawei and SMIC have made an incredible, secret breakthrough, this means that this process has no future. Maybe they can squeeze out a little more density for another round, but beyond that they would be breaking the laws of physics. Although the Kirin 9000 is a real achievement, we are extremely skeptical that it will really change anything.
Teardown of the Huawei Mate 60 Pro smartphone. Source: Bloomberg
Of course, this is a highly sensitive, heavily studied area, and so we have entered the crazy age of online commentary with exaggerated claims, wild extrapolations and intense fear-mongering on Twitter. Part of the problem is that there are three major groups of voters who want the Kirin 9000 to mean more than it probably does…
First, there are the pro-China commentators. They want to show that China is resilient in the face of US “aggression” and make strong reference to the supposed 1 million Mate 60s that have already sold out in China. The second camp is made up of US-China watchers who want more sanctions against China, and so they go around the internet screaming “wolf” (or the mythical reindeer lion Kirin) to urge the Biden administration to tighten restrictions force. And then there’s a third camp that portrays everything as a failure of the Biden administration (no names, but you know who we’re talking about). Unfortunately, these three groups are very good at raising their voices online, even in the face of facts and common sense. There is a tremendous amount of noise in the channel at the moment.
Strangely enough, the quietest group are the two companies involved, Huawei and SMIC. Huawei has reached the point where it no longer feels the need to speak to the Western media and has little reason to say anything. The SMIC, for its part, is very afraid of further restrictions from the US government and could very well end up never saying anything about its role in this.
To put it simply, this doesn’t really change anything. It is unlikely that Huawei can go far on this path. They can compete with today’s phones, but soon the gap will be too big and there will be no way to narrow it. This means their phones require more power than their competitors to perform the same tasks, and the growing focus on AI in phones will only exacerbate this problem.
However, this shows how Chinese companies will deal with US sanctions. They go above and beyond, are incredibly sensible in their design compromises, and liberally use tape to fix problems. We could even argue that differentiation in mobile phones has increased so much that many consumers may not care as much about the differences between a well-designed 7nm-based phone and a fully featured 3nm-based phone. However, in the larger data center market, these gaps will be much more important.
In short, the sanctions still seem to be working, forcing Chinese companies to make all sorts of compromises. They show the limits of what they can achieve without access to the global semi-finished products industry.