huawei's chip progress stalls under us restrictions
Shenzhen, Wednesday, 18 December 2024.
Huawei’s latest smartphone, the Mate 70 series, highlights a stagnation in adopting advanced chip technology, underscoring the impact of U.S. restrictions on China’s semiconductor development. Despite previous strides with the Mate 60, the new analysis suggests minimal progress, with chips in the Mate 70 showing little advancement from last year’s models. The constraints primarily affect SMIC, China’s leading chip manufacturer, which struggles with outdated machinery due to tightened U.S. export controls. These controls aim to curb China’s technological growth, particularly in military applications, by limiting access to cutting-edge chip manufacturing tools. The stalled development could impact Huawei’s market position and its ability to challenge rivals like Apple. While the Mate 70 remains popular in China, its success hinges on SMIC’s ability to maintain a stable chip supply amidst these geopolitical constraints.
Market impact analysis
In China’s semiconductor industry, investment activity has declined significantly, with only 677 deals recorded in the first 11 months of 2024, marking a 35.9% year-on-year decrease [2]. The latest analysis by TechInsights reveals that Huawei’s Mate 70 series employs the same manufacturing process as its predecessor [1], indicating technological stagnation. This limitation stems from SMIC’s restricted access to advanced manufacturing equipment [1][3].
Manufacturing constraints
SMIC faces significant production challenges, with only 35% of its semiconductor manufacturing equipment being locally sourced [2]. The company relies on outdated machinery, using manufacturing processes that Taiwan’s TSMC had mastered before 2018 [1]. The Biden administration’s December 2024 expansion of export controls, affecting 24 types of semiconductor manufacturing equipment and adding 140 companies to the Entity List [4], further complicates SMIC’s advancement potential.
Market share dynamics
Despite technological constraints, Huawei has managed to increase its market presence. According to Canalys data, Apple’s share of premium smartphone sales in China has dropped from 75% to approximately 50%, while Huawei’s share has more than doubled [1]. This shift occurs despite production limitations, demonstrating strong domestic market support [1][3].
Investment landscape
China’s semiconductor sector has seen substantial government support, with the national circuit industry fund growing to $47 billion in 2024 [3]. Local governments have contributed an additional $25 billion to support high-tech development [3]. However, the effectiveness of these investments is limited by U.S. restrictions, particularly affecting advanced chip production below 7nm [3][4].