State investment fund is helping Huawei build its chip network

Beleaguered Chinese tech giant Huawei, which experienced major setbacks in recent years due to US sanctions, is back with a renewed focus and determination. China’s powerful local smartphone supply chain, particularly the chip industry, has helped the firm stand up and fight. It is aiming to double its smartphone sales in 2024. According to Bloomberg, a state investment fund has backed Huawei as it builds a robust self-sufficient chip network.

Huawei is using a state investment fund in its efforts to bypass US sanctions

In May 2019, the US government added Huawei to the Entity List, a list of foreign persons, entities, and governments under trade restrictions. A revision in May 2020 further tightened sanctions on the Chinese firm, cutting off its access to the latest smartphone technologies, including advanced semiconductor chips. For a few years, it couldn’t make competitive phones. However, it created a self-sufficient chip network and is fighting back.

Bloomberg investigated Huawei’s role in China’s chip industry and found that it is working closely with several smaller local firms to strengthen its network. The firm provides them with engineering expertise and financial support. “It often does this without disclosing its involvement — which would trigger US restrictions,” the publication reports. A Shenzhen city government investment fund is helping its endeavor.

According to the report, Huawei has already received a $30 fund from the state. However, state support for the company has ended. In fact, it has reached “unprecedented levels” as the firm works with other local companies. Huawei is leveraging the funds to improve local semiconductor technologies and expand the production of chips, including image sensors, RF chips, memory chips, logic chips, and everything in between.

Among the firms that Huawei has ties with are three subsidiaries of SiCarrier with expertise in developing lithography machines. US sanctions don’t allow the company to import advanced lithography equipment from abroad, so it has to develop them locally. SiCarrier was founded in 2021 and has quickly formed a “close, symbiotic relationship with Huawei.” The latter has transferred about a dozen patents to the former. They have exchanged staff too.

Huawei hired former ASML employees to help develop chipmaking machines

Huawei and SiCarrier’s relationship is so close that their staff can work directly on each other’s sites. The firm has hired several former ASML employees as it sets out to develop powerful chipmaking machines locally. ASML is a Dutch firm with a monopoly on extreme ultraviolet (EUV) lithography machines. A handful of those hirings took place following US sanctions in 2019.

Of course, it takes years of hard work to develop the most advanced semiconductor technology from scratch. SMIC (Semiconductor Manufacturing International Corporation) has been around for over two decades but still only makes 7nm chips when firms like TSMC and Samsung have begun 3nm mass production. However, Huawei appears determined to turn the tide over the next few years.

Its Mate 60 flagship lineup and the Mate X5 foldable are all powered by SMIC-manufactured Kirin 9000S 7nm processor. Industry experts believe the chip is roughly five years behind the current most advanced technology globally. The Biden administration’s export ban in 2022 aimed at keeping China’s semiconductor industry at least eight years behind the rest of the world. So China and Huawei are already making rapid progress.

Not just the chips, China has a robust local supply chain of other smartphone components too. For example, the Huawei Mate 60 used cameras made by OFILM (a former supplier to Apple), BOE displays, and batteries from Sunwods, Apple’s main battery supplier. Considering all this, Huawei may soon bypass US sanctions and make a grad return to the global tech scene.