Huawei Technologies and its partner Semiconductor Manufacturing International (OTCQX:SIUIF) depended on U.S. technology to produce an advanced chip in China in 2023, Bloomberg News reported citing people familiar with the matter.
Semiconductor Manufacturing International used gear from Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX) to make an advanced 7-nanometer chip for Huawei last year, the report added.
Huawei surprised many in August 2023 by quietly launching its new phone, Mate 60 Pro. The company did not provide information on the power of the chip inside but people speculated that it could be using a 5G capable chip. The chip, reportedly made by China’s Semiconductor Manufacturing ignited concerns in the U.S. and raised questions about how it was possible, without the company being able to access critical technologies.
The phone also prompted an evaluation by the U.S. to learn the details on the chip inside, which is the most advanced semiconductor China has manufactured as of yet.
The chip is still generations behind the top components from global companies, but still ahead of where the U.S. intended to stop China’s advance.
However, the machines used to manufacture it, still had foreign sources including technology from ASML (ASML) and gear from Lam and Applied Materials.
Semiconductor Manufacturing International had used equipment from ASML for the chip breakthrough, the news outlet had reported in October 2023.
Semiconductor Manufacturing International received the U.S. machinery before the U.S. restricted such sales to China in October 2022, the report noted. Both companies were among the U.S. suppliers which started pulling their staff from China after those rules came into effect and barred U.S. engineers from servicing some machines in the Asian country. ASML also told its U.S. employees to stop working with Chinese customers due to the U.S. curbs. However, Dutch and Japanese engineers are can still service many machines in China.
Last month, Applied Materials disclosed that it received multiple subpoenas from U.S. government authorities seeking information pertaining to its China shipments.
Now, companies cannot sell cutting-edge, U.S.-origin technology to Huawei or Semiconductor Manufacturing International. Both the companies have been blacklisted by the U.S. for alleged links to the Chinese military.
The U.S. has brought in rules to limit the export of advanced chips and equipment to China. These restrictions have made it harder for Chinese companies to get access to the machines required to make the most powerful chips, such as those needed to make artificial intelligence, or AI, products.
Huawei once was in race with Apple (AAPL) and Samsung (OTCPK:SSNLF) to be the world’s biggest handset maker until U.S. restrictions, starting in 2019, began to curb its access to chip manufacturing tools needed to produce its most advanced models.
Apple’s iPhone sales in China fell 24% year-over-year in the first six weeks of 2024, amid rising competition from Huawei, Counterpoint Research had reported.
