Matthew Schleich and William Alan Reinsch
Huawei’s new smartphone, the Mate 60 Pro, has been shown to contain a powerful new chip, defying U.S. attempts to curb China’s semiconductor industry. In a device “teardown,” TechInsights and Bloomberg News found that the 7-nanometer (nm) chip was produced by China’s top domestic chipmaker, Semiconductor Manufacturing International Corporation (SMIC). News of the made-in-China chip broke just days after Commerce Secretary Gina Raimondo’s trip to China, prompting National Security Advisor Jake Sullivan to announce that the United States would be seeking “more information” on the specifics of the new tech. At worst, the revelation of a domestically produced 7 nm chip shows that cracks can be found and exploited in the U.S.-led semiconductor blockade. Despite this episode, however, signs suggest that U.S. and allied export controls have limited China’s near-term ceiling in terms of manufacturing cutting-edge chips at scale. Secretary Raimondo confirmed these suspicions on Tuesday, saying that there was “no evidence” that China could produce these chips at scale.
Q1: How was the chip manufactured, and how does it compare to other models?
A1: According to TechInsights, a Canadian technology research firm, the Kirin 9000s—the chip found in the Huawei Mate 60 Pro—was produced by China’s SMIC. The “die,” or the physical semiconducting surface on which a computer chip is fabricated, showed “various identifying features” that point to fabrication by the Shanghai-based manufacturer. SMIC, along with other Chinese firms, are known to already possess deep ultraviolet (DUV) lithography capabilities, which allow chipmakers to print the integrated circuits onto semiconductors using beams of light. Although these DUV lithography machines are typically associated with the production of chips in the 28 nm to 14 nm range, they can produce 7 nm chips using a technique called “multi-patterning.” In essence, the chip is exposed to DUV lithography multiple times to create more detailed patterns down to the 7 nm level.
China’s SMIC has been able to produce the 7 nm chip for well over a year using multi-patterning, but only in limited quantities. Last July, Bloomberg reported that SMIC was producing 7 nm chips for Bitcoin-mining machines, a much smaller market for chips than Huawei’s cellphones. This low-volume 7 nm crypto chip, according to TechInsights at the time, could serve as a stepping stone for scaled-up 7 nm production. By using a 7 nm chip in a widely anticipated Huawei smartphone, China may be signaling that it is confident in SMIC’s ability to scale the chip into wide commercial availability. However, semiconductor experts have serious doubts about the sustainability of 7 nm production with China’s current DUV-driven capability.
Although the Kirin 9000s is a supposed victory for the Chinese semiconductor fabrication industry, there is still a substantial gap between 7 nm and the world’s cutting-edge chips. Taiwan-based TSMC had fully scaled up 7 nm production as early as 2019, putting SMIC roughly four to five years behind. Today, South Korea’s Samsung and Taiwan’s TSMC can both produce 3 nm chips at scale using extreme ultraviolet (EUV) lithography, which is more advanced than DUV. Apple announced this month that its new iPhone 15 Pro and iPhone 15 Pro Max will house the first widely available 3 nm chip, TSMC’s A17 Pro.
Regardless of today’s cutting edge, a 7 nm chip is a highly advanced processor that has practical applications across many emerging technology industries, including artificial intelligence (AI), 5G telecommunications, and military weapons systems.
Q2: How believable is the suggestion that Chinese firms can produce 7 nm chips at scale?
A2: Semiconductor industry experts have long been skeptical of China’s ability to produce 7 nm chips at commercial scale. SMIC’s new 7 nm chip has led many analysts to call for a tempering of expectations; there is still plenty of doubt about SMIC’s ability to sustainably scale its advanced chipmaking. Creating chips at the 7 nm level using DUV lithography is a challenging process that poses two problems: low manufacturing yield and high rates of machine use. DUV machines produce imperfect results when utilized in this way, such that the yield per wafer could be as low as 15 percent. The lower the yield rate, the higher the market cost of the chips, hampering their commercial viability. In addition, because the DUV lithography machine is limited in how finely it can print a pattern onto a semiconducting surface, the machine needs to be used multiple times to achieve nodes smaller than 14 nm. In the case of SMIC’s manufacturing process, the DUV machine could see three to four uses on a single chip before producing a 7 nm result. As the usage of each machines increases, energy cost and maintenance requirements also become an issue.
EUV lithography machines are the ideal tools for producing chips at 7 nm and below. However, the Dutch-based company ASML—the world’s only manufacturer of EUV equipment—has not been granted a license to export EUV machinery to China, pursuant to an intense diplomatic push from the Trump administration in 2019 and 2020. It will be some time before China has the ability to manufacture its own EUV equipment; Chinese firm SMEE, China’s top rival to Dutch-based ASML, is expecting to commercialize equipment capable of 28 nm transistor size by the end of 2023. China, therefore, finds itself wholly reliant on foreign countries to supply them with the means to make advanced chips.
Without advanced EUV machines, SMIC and other Chinese firms need to make use of DUV lithography machines to make 7 nm semiconductors, raising doubts about widespread profitable commercialization of chips like the Kirin 9000s. This suggests that the shipments of Huawei’s new 7 nm powered phone could be limited to a small fraction of its total offering.
Q3: How do U.S. chip export controls work to curb China’s access to semiconductors?
A3: Over the past several years, U.S. policymakers have become increasingly concerned with China’s access to the world’s most advanced chips, citing their dual-use capabilities. To prevent Chinese companies from getting an edge over the United States and its allies in developing cutting-edge semiconductors, Washington has extensively leveraged export controls.
Export control and sanctions packages aimed at controlling China’s access to advanced semiconductors have been regularly implemented over the past several years. In 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) added SMIC to the Entity List, stating that items uniquely required to produce chips of 10 nm and below would be met with a presumption of denial.
The purpose of U.S. semiconductor export controls, for a time, was to keep China’s access to semiconductors consistently behind the contemporary cutting edge. This was referred to as the “sliding scale” approach, characterized by a constant U.S. capabilities advantage relative to China. However, in September 2022, the Biden administration changed course. In an address to the Special Competitive Studies Project, Sullivan declared that the sliding scale policy for semiconductors no longer matched the strategic environment—in its place, the United States would adopt a policy to “maintain as large of a lead as possible.”
Sullivan’s remarks were quickly followed by the October 7, 2022, export controls announcement from BIS, which put into place a landmark set of restrictions on Chinese business to purchase and/or manufacture high-end chips. The new rules, among other things, restrict U.S. persons from assisting PRC-based semiconductor fabrication plants without a license and prevent any exports to China of logic chips “16nm or 14nm, or below.” Equipment utilized in the manufacturing of chips was also barred. This unprecedented escalation signaled that, going forward, U.S. strategy would be to stop China’s chipmaking ability in its tracks, and even work to degrade current capabilities.
The October 7 export controls targeted two areas of the semiconductor supply chain: high-end semiconductor manufacturing equipment (SME) and electronic design automation (EDA). The United States and its allies control critical swaths of the SME and EDA industries, making Chinese chipmakers reliant on imports to scale up fabrication. Limiting China to DUV machines, rather than the next-generation EUV, is a prime example of the effectiveness of targeting SME and EDA.
Well-executed U.S. export controls in these areas, along with harmonized export controls from U.S. allies with SME and EDA assets, would effectively wipe away China’s ability to manufacture advanced semiconductors domestically. However, this is easier said than done for the United States, as it has very little control over how other countries choose to implement export restrictions. One of the few avenues of influence for the U.S. government is the use of the foreign-direct product rule, which allows the United States to effectively expand export controls over technologies that are manufactured with U.S.-made inputs. In the end, through extensive diplomatic efforts, the United States secured commitments from Japan and the Netherlands to implement strong semiconductor-related export controls earlier this year.
Q4: What kinds of systems would benefit from a 7 nm chip?
A4: Advanced semiconductors have dual-use capabilities, meaning they can be used in consumer goods as well as military systems. Logic chips, like the Kirin 9000s found in the new Huawei smartphone, have applications across a variety of sectors if produced at scale.
An immediately obvious benefit to a 7 nm chip is a consumer-facing product: running smartphones on 5G networks. Taiwan-based TSMC stopped producing 7 nm 5G chips for Huawei in September 2020 in response to U.S. sanctions. Chips at the 28 nm and 14 nm level are not efficient enough to run phones on modern 5G networks—without 7 nm chips, 5G-connected phones would have to be larger, drain battery faster, and cost more to produce. In the third quarter of 2022, Huawei had reportedly depleted its stockpile of 7 nm chips, crushing its ability to manufacture its line of 5G compatible phones. With the new SMIC chip, Huawei was able to announce that its Mate 60 Pro would connect to 5G networks.
As for military uses, China’s People’s Liberation Army has expressed great interest in integrating AI into its military. Previous CSIS analysis found that there are relevant national security implications derived from advanced Chinese AI, including the ability to simulate hypersonic missiles and nuclear weapons systems. One of the key inputs to these AI-enhanced systems is access to advanced semiconductors. AI-specific chips have physical constructions that are different from typical processors, and they usually have transistor sizes near the cutting edge (7 nm or less). Although China can still import AI chips from the likes of Taiwan’s TSMC, building indigenous manufacturing capability is seen as critical in the likely case that future restrictions ban imports.
These 7 nm chips would not be particularly useful for traditional military applications, as most military applications—aside from cutting-edge technology, like AI—rely on legacy chips with much larger transistor sizes.
Q5: How have U.S. policymakers responded to the news?
A5: The response from U.S. policymakers to the new Huawei phone have ranged from subdued to outraged. The Biden administration commented only briefly on the issue, with Sullivan saying that the United States would investigate the details of the new chip. On September 19, Commerce Secretary Gina Raimondo announced that the United States has seen “no evidence” that China could produce 7 nm chips at scale.
Republican lawmakers on the Hill have had an angry public reaction to the 7 nm chip. House Foreign Affairs Committee Chairman Representative Michael McCaul (R-TX) led a group of Republican members in authoring a letter to the head of BIS expressing their frustration: “Due to the ubiquity of U.S. origin technology throughout the semiconductor supply chain, these reports suggest a violation of U.S. export control regulations. . . . We are extremely troubled and perplexed about the Bureau of Industry and Security’s (BIS) inability to effectively write and enforce export control rules against violators, especially China.” The letter finishes by calling for a full economic blockade of Huawei and SMIC, as well as criminal prosecutions of their executives.
Conclusion
While it is, on the surface, concerning for U.S. lawmakers to see SMIC produce a 7 nm chip for Huawei, a deeper analysis suggests that U.S.-led export controls are limiting China’s domestic semiconductor production capabilities. SMIC’s reliance on imported DUV lithography machines—in the absence of well-controlled EUV machines—is likely to make 7 nm chip production unprofitable and unsustainable in the long term. Additionally, preventing the import of ASML’s EUV machines by Chinese firms puts a hard stop on attempts to go smaller than 7 nm. Policymakers justifiably concerned about China’s access to advanced semiconductors should track the ongoing rollout of the Mate 60 Pro to understand China’s true chipmaking capabilities, which will most likely be limited at best.
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