How Huawei's new chip changes the US-China tech landscape

Using existing resources, the chip is fabricated by China's leading foundry, Semiconductor Manufacturing International Corp (SMIC).

This marks a significant advancement for Chinese foundries, heralded as a "made-in-China design and manufacturing milestone," says TechInsights, a Canada-based semiconductor research firm. However, neither Huawei nor SMIC has chosen to comment on these developments, leaving room for widespread speculation.

Rise in nationalistic sentiments

The launch and the chip at its core could potentially be a watershed moment for the Chinese tech industry, showcasing the country's capability to produce sophisticated technology despite sanctions. However, analysts caution that it's too early to interpret this as a decisive win for China.

Within China, the Mate 60 Pro has been met with an eruption of patriotic fervor. Netizens have hailed the smartphone as an emblem of China's technological resilience in the face of US sanctions. This enthusiasm isn't just digital; it's also affecting consumer behavior. The Mate 60 Pro's retail price of 6,999 yuan (approximately US$958) has not deterred consumers, who have been flocking to Huawei’s retail outlets, traditionally quiet spaces. The stock prices of SMIC and related firms have surged, registering about a 5% increase over the past week in Hong Kong.

Government silence, industry speculations

Chinese state media have touted the phone as a triumph against US restrictions, but both Huawei and the Beijing government have been notably reticent about disclosing technical details. Some teardown articles discussing the phone’s internals have been mysteriously removed from Chinese social media platforms.

Dan Hutcheson, vice chair of TechInsights, cautions that the phone's success could trigger “even greater restrictions than those that exist today” on China's tech industry. Currently, China is prohibited from acquiring advanced extreme ultraviolet (EUV) lithography tools from Dutch supplier ASML, critical for next-generation chip manufacturing.

A chip off the old block?

The new chip could trigger "even greater restrictions than those that exist today" in China. This view was echoed by Tilly Zhang, an analyst at research agency Gavekal Dragonomics, who said that while the chip embarrasses the US, it is "still a few years behind the current state of the art."

The Kirin 9000s is the first processor to use SMIC’s new 7nm technology, while the industry is gearing up for 3nm chips as early as next year. As per current standards, the latest chips in the Android and iOS worlds are currently based on the 4nm process; for example, Apple's flagship A16 Bionic or Qualcomm's Snapdragon 8 Gen 2 processor. Both are likely to jump into the 3nm process in their next announcement, with new handsets featuring the new chips rolling out as early as Q1 2024. So Huawei has to do a lot to catch up if you are taking Moore's law seriously into consideration.

US Reaction: A double-edged sword?

As Beijing celebrates this technological leap, Washington's corridors of power are simmering with concern and speculation. SCMP reports that Jake Sullivan, US National Security Adviser, recently broke Washington's silence on the matter, stating the US government is keen to understand the "precise composition" of Huawei's new chip.

Sullivan, during a White House briefing, argued that the United States should maintain its policy of imposing technology restrictions only on national security grounds, not on the broader issue of commercial separation.

The US may also have to grapple with its own domestic divide on the effectiveness of its sanctions. US firms like Qualcomm and Nvidia may advocate for reduced sanctions, contending that stringent restrictions have inadvertently empowered China's quest for technological self-reliance while denting American commercial interests.

Mate 60 Pro出貨預估顯著提升，華為對產業與股市的不可忽視之影響力回歸中 — Part 1 / Mate 60 Pro shipment estimates have increased significantly; Huawei’s undeniable influence on the industries and stock markets is coming back  —  Part 1https://t.co/BjdU16lbe8

— 郭明錤 (Ming-Chi Kuo) (@mingchikuo) September 4, 2023

The larger implications

The emergence of the Mate 60 Pro has significant geopolitical implications. Kuo Ming-chi, an analyst at TF International Securities, believes Huawei may sell at least 12 million units within a year of launch, a far cry from Apple's estimated 90 million units for its upcoming iPhone 15. The Mate 60 Pro is unlikely to return Huawei to its golden days when it was competing neck-to-neck with Apple and Samsung, but it undeniably sends a message.

Experts suggest that Washington must tread carefully. A misstep could not only compromise the effectiveness of technology sanctions but also necessitate a review of US policy vis-a-vis China in the complex web of global tech politics.

As the world watches, Huawei's Mate 60 Pro has become more than a smartphone. It's a symbol, a statement, and perhaps a harbinger of what's to come in the ever-intensifying US-China tech war.