By Lise Jaber
Since its placement on the US Entity’s List, Huawei has been increasing its sprawling grip on the chip supply chain and is on its way to fulfill the CCP’s wish for self-sufficiency.
Huawei and the US Entity List
In 2014, Huawei was the leading manufacturer of telecoms infrastructure, with a third of the world market share in the 3G and 4G technologies, and poised to become the leader in the 5G field, while accounting for 11% of TSMC’s sales. As early as 2000, the US government started piling up grievances against Huawei, accusing the Chinese telecom giant of a decade of technology theft, trade secrets and failure to respect the terms of partnerships with US companies. Suspicions of espionage through backdoor installations in 5G telecom equipment began to intensify.
In April 2019, Trump openly declared that “the race to 5G is on, and America must win”[1]; a month later, he employed the IEEPA (International Emergency Economic Powers Act) to blacklist Huawei by presidential decree. The Department of Commerce (DoC) immediately added Huawei to its entity’s list. This measure was a decisive turning point in American policy, as it went beyond the traditional scope of Huawei’s activities (network equipment, services, smartphones).
A year later, the DoC put in place exemption measures that quickly came to an end in light of two events: in May 2020, the Bureau of Industry and Security (BIS) expanded its scope to block Huawei’s acquisition of semiconductors and announced that licenses are required to sell IPs to Huawei. In reality, this rule directly targeted deliveries to HiSilicon (a Huawei subsidiary) by third-party suppliers, including TSMC.
At the same time and as early as 2014, a five-year plan for integrated circuits was announced by the Chinese government. It’s a financial tool, a state investment fund, known as the Big Fund. The fund, overseen by the Ministry of Finance in partnership with companies and banks such as the China Development Bank and Huaxin Investment, called for a $150 billion package supplied by local authorities and the central government. The aim is simple: to stimulate the indigenization of chip production through substantial funding and tax incentives. 60% of the fund is allocated to the first links in the value chain (design and manufacturing). The aim is to create the next generation of “national champions” in the key sectors consolidated in the Made in China 2025 plan.
A silent national champion
Fast forward to August 2023 when Huawei quietly unveiled its new smartphone, the Mate 60 Pro, featuring – much to the great surprise of both the general public and US politics – the domestically designed and manufactured chip : the 7 nm Kirin 9000S.
Neither Huawei nor SMIC have disclosed their methods for achieving this milestone. This achievement has surprised the American Bureau of Industry and Security (BIS) which has set up new export controls to stop the transfer of advanced chips (design and equipment) to China. But much more than a surprising milestone, the launch of the Huawei Mate 60 Pro highlighted another important aspect of China’s strategy which is Huawei’s tactics of concealing its activities by operating under various aliases and partnering with other domestic companies, making it hard for western nations to gauge China’s technological advancements accurately.
Now more than ever, Huawei is increasingly positioning itself as a pivotal player in China’s semiconductor industry. The company is collaborating with SMIC, a major supplier of semiconductors for its smartphones – and great beneficiary of the Big Fund. This allows Huawei to expand its influence throughout the entire value chain of semiconductors, from design to manufacturing. Huawei provides engineering expertise and financial support to smaller companies in strategic areas of the supply chain, creating a whole network of companies. This “Huawei network” includes optics specialists, chip equipment developers and chemical manufacturers[2].
In March 2024, Huawei was reported to have been discretely expanding its roles, notably in lithography, a critical bottleneck for semiconductor production dominated by ASML, by opening a new R&D center in West Shanghai (a campus already housing the headquarters of HiSilicon, a Huawei subsidiary)[3]. The company is also actively fostering the development of other critical technologies, such as artificial intelligence (AI), by integrating AI into various industries.
The road to open-source
In addition to these silent yet major achievements on the hardware side of the chip value chain, Huawei and other major Chinese tech companies like Alibaba and Tencent are becoming more and more pivotal in developing new cores based on RISC-V instruction-set architecture (ISA).
RISC-V is an open source instruction set architecture (ISA) based on an established reduced instruction set computing (RISC) principles. Which means that unlike proprietary ISAs, RISC-V is freely available enabling anyone to design, manufacture, and sell RISC-V-based chips without licensing fees. RISC-V is not a technology like Intel’s x86 architecture or ARM’s Cortex-A series processors in the sense that it is not a standalone technology in itself but rather provides a framework that others can use to create their own implementations, much like a standardized blueprint that allows interoperability and compatibility between different implementations of processors.[4]
Currently, the 2 main ISAs in the chip industry are Intel x86, predominantly used in desktops and laptops, and ARM, which is preferred for mobile and embedded systems. Intel, a US company, holds the intellectual property rights to x86, while ARM, a British entity complies with US export controls.
In order to circumvent restrictions and achieve independence from western architectures, Alibaba and Tencent are spearheading efforts to enhance RISC-V’s capabilities, particularly in AI and cloud computing. As part of the Chinese national plan for self-sufficiency and in a concerted effort to boost RISC-V adoption, China’s government and the Chinese Academy of Sciences launched significant initiatives in 2019 and 2021, including the establishment of the Beijing Open Source Chip Research Institute[5].
Last November, US lawmakers expressed concerns[6] regarding China’s keen interest in open-source and RISC-V, calling for a new set of restrictions. Easier said than done : RISC-V International, the non-profit organization managing RISC-V, is headquartered in Switzerland, out of the reach of the US government.
The combined pressure from US restrictions and China’s reinforced and historically structured industrial policies have made Huawei the champion of China’s semiconductor industry: by becoming a sprawling player in every link in the chip value chain and extending its reach to design and lithography including the development of open-source, Huawei is clearly a major conglomerate in service of China’s strategy of self-reliance and technology independence.
Lise Jaber is an Industrial Property specialist. She’s also currently specializing in the chip industry and has won the best thesis award for Microchips & Megapowers : the geopolitics of semiconductors. She also talks about hot topics of the chip on her Substack.
[1] https://www.cnbc.com/2019/04/12/trump-on-5g-initiatives-a-race-america-must-win.html
[2] https://www.bloomberg.com/graphics/2023-china-huawei-semiconductor/?embedded-checkout=true
[3] https://asia.nikkei.com/Business/Tech/Semiconductors/Huawei-building-vast-chip-equipment-R-D-center-in-Shanghai
[4] https://open.substack.com/pub/lisegeopo/p/risc-v-a-new-arena-in-the-us-china?r=2wbr73&utm_campaign=post&utm_medium=web
[5] https://thechinaacademy.org/china-doubles-down-on-risc-v-chip-development-amid-potential-us-restrictions/
[6] https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/11.1.23-riscv-letter.pdf
