Huawei’s 5G chip breakthrough needs a reality check

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This is going to be a BIG week for US-China relations: On Wednesday, Xi Jinping will sit down with Joe Biden in San Francisco and talk about military issues, trade, and more. It will be his first visit to the US in six years.

Well, so much has happened since 2017. A harmonious era in US-China relations ended; we've seen a trade war, a pandemic, an ongoing technology rivalry, an off-course spy balloon, and too many other tumultuous developments to list here.

It's in this context that Huawei, the Chinese telecom and technology company, became something of a poster child for souring relations. It was one of the first Chinese tech companies to receive intense scrutiny and become a target for sanctions driven by national security concerns. In fact, many of the ways the US currently deploys sanctions in the US-China tech war are inspired by its success in curbing Huawei. (If you want to know more about the fight over semiconductors, read more from me here and here.)

But it'd be a mistake to think Huawei has collapsed. Far from it, in fact. In August-at the same time US Commerce Secretary Gina Raimondo was visiting China-Huawei suddenly, without any public announcement, shocked the world when it started selling a new flagship phone, the Mate 60 Pro.

The big surprise here was that this phone uses a new 5G chip, even though the company has been blocked from sourcing 5G chips or working with chip factories outside of China since 2020. So regulators in DC and other China hawks panicked that the relatively advanced seven-nanometer chip proved the company had somehow circumvented sanctions.

But had it really? Researchers who broke down the chip believe that it seems to be entirely designed by Huawei and made in China.

I've been wanting to understand what really happened here-and what it means more broadly for the ongoing competition over chips and other tech. So I recently spoke with Harish Krishnaswamy, a professor at Columbia University who studies telecommunications and chip designs.

The bottom line is that the Mate 60 Pro shows a manufacturing breakthrough on Huawei's side that puts it back into the smartphone game. It's clearly wrong to assume that they're not a player because of the sanctions," Krishnaswamy told me.

He explained that the designing of 5G chips is not necessarily difficult for Chinese researchers and companies, so it wouldn't have been that hard for Huawei to create a 5G chip in the lab. What is much harder is mass-producing a 5G chip at great quality and reasonable costs so it can be used in a consumer product.

Producing advanced 5G chips is just a very large engineering endeavor that very few companies can pull off," he says. Only a handful of companies-like Qualcomm (American), MediaTek (Taiwanese), Samsung (South Korean), and HiSilicon (a chip company that is a Huawei subsidiary)-have successfully made 5G modem chips. Even tech giants like Intel and Apple have failed so far to develop in-house 5G chips.

So when the US sanctions blocked companies from supplying chips to Huawei for its phones, the Chinese manufacturer had no choice but to rely on HiSilicon alone.

But the sanctions also cut HiSilicon off from the global network of factories (called foundries" or fabs" in the semiconductor industry) that are vital in manufacturing and testing the products. TSMC, the Taiwanese chip fab that was making chips for HiSilicon at the time, stopped supplying it in 2020.

This further narrowed the options for Huawei. It could only turn to Chinese fabs, and that was a costly and time-consuming process. Anytime you've designed a chip in a fab and then, for some reason, you cannot source that anymore and move to another company, just that process of redesigning, qualification, and ramping production takes at least three years," says Krishnaswamy, who also owns a chip company that works closely with fabs.

Then, making things even more challenging for Huawei, Chinese chip fabs were later put under sanctions and now can't access any cutting-edge chip-making technologies.

So when Huawei made the smartphone with a new 5G chip earlier this year, Krishnaswamy says, the industry was surprised by how quickly it had been able to turn around a design, shift to a Chinese fab, manufacture the new chip, and get it to production rate, all while having to deal with significant revenue losses caused by sanctions. For Huawei to show [that it is] able to do that is definitely impressive," he says.

Indeed, since news came out that it was making its own 5G chips in Chinese fabs with minimum overseas input, the company has become a source of national pride for many in China. For them, it's an example of how US sanctions don't always work as intended. They may force Chinese companies to adapt, move production back to China, and catch up in areas of tech where they had lagged-and that can ultimately work out in China's favor.

Still, it may be too early for them to cheer, as there are other obstacles to clear before Huawei can become competitive in the high-end phone market again.

After any company shows proof of life-basically, that they have a chip-the long-term success is really governed by the ability to source [it] in large volumes and get the costs down over time," Krishnaswamy says.

Huawei is experiencing a reality check right now. A few months after the release of the new model, domestic enthusiasm has been hurt by the fact that it's still very difficult for consumers to get a phone. They are back-ordered for months because of a supply shortage. In fact, just this past weekend, which was China's equivalent of Black Friday, the top-selling phones were still from Apple and Xiaomi (another Chinese brand).

At the end of the day, for any chance of regaining its dominant position in the smartphone market, Huawei needs to compete with Qualcomm and Samsung to reliably make better and cheaper chips, and that's very difficult to pull off. The US chip blockade, which is consistently being expanded and strengthened, will only make it harder in the future-even if it hasn't made it impossible thus far.

Unless the Biden-Xi meeting produces some truly surprising results this week, the bitter winter of US-China relations may continue for years. In which case there are a lot more battles ahead for Chinese companies like Huawei, and one breakthrough in chip manufacturing won't be enough.

Do you think Huawei still has a chance in the global smartphone market? Let me know your thoughts at zeyi@technologyreview.com.

Catch up with China

1. Xi wanted to dine with American business leaders in San Francisco before he met with Biden. The White House rejected the proposal, part of a lengthy back-and-forth over the visit's agenda. (Wall Street Journal $)

2. A Chinese university tapped Hikvision, the surveillance camera company, to build a smart campus project last year. It includes an alert system that flags ethnic minority students who choose to fast during Ramadan. (IPVM)

3. As Huawei builds up its Harmony Operating System to replace the now-embargoed Android system, Chinese tech companies are quickly recruiting developers who understand HarmonyOS. (South China Morning Post $)

4. The Nepali government decided to ban TikTok, claiming that the app has spread discord and disturbed social harmony. (Nepali Times)

5. After Chinese hobbyist drones were heavily used in the war in Ukraine, the Israeli military is now stockpiling them to use in its war. (Wall Street Journal $)

6. A new bipartisan bill in Congress seeks to block the US government from doing business with Tether, the issuer of a major stablecoin called USDT, because Tether's parent company is based in Hong Kong. (Coindesk)

7. Baidu ordered 1,600 AI chips from Huawei as an alternative to Nvidia's A100 chip to use in servers, showing how Chinese companies cope with the bottleneck on computing power. (Reuters $)

8. The founder of a major Chinese game-streaming website is apparently being held by the police. It could be related to an investigation of porn and gambling content on the platform. (Financial Times $)

Lost in translation

This year, many Chinese smartphone users found themselves pestered by a new form of advertising: whenever they shook their phone, intentionally or not, the e-commerce app would automatically open.

It turns out this is the latest marketing trick that exploits the gyroscope function in modern-day phones, which detects movement to calculate steps or find directions. Late last year, some Chinese tech companies came up with an industry standard on the technical specifications for how to open a new app when movement is detected. It quickly started being deployed to spam users with ads, and it has drawn widespread complaints. According to the Chinese publication Time Finance, Apple has become aware of the phenomenon and instructed several top Chinese apps to ban the practice starting this month. But it's hard to say whether that's enough to prevent more apps from following suit.

One more thing

A traveler ordered food delivery to his hotel room in China but never got it. Eventually, he received a call asking for help-the robot that was carrying his food had tripped and couldn't get up. Maybe robots will eventually rule the world, but fortunately, not today.

I've been thinking a lot about this lately... the guy ordered delivery to the room at a hotel, called down and concierge said it had already been sent up, but eventually he gets a call from the delivery robot asking for help... #china #robotwars pic.twitter.com/Miy6Ibyvku

- Elyse Ribbons (@iheartbeijing) November 7, 2023