#099a U.S. Sanctions Backfire As China Ramps Up AI Chip Production
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AI BYTE #1 📢: U.S. Sanctions Backfire As China Ramps Up AI Chip Production
⭐China’s chip industry is making remarkable progress despite the U.S. sanctions that aim to slow down its technological development.
The latest evidence is that China’s biggest contract chip manufacturer, SMIC, is setting up new production lines to make 5 nanometer chips for Huawei. This would put SMIC just two generations behind the world’s leading fab, TSMC, which is making 3 nanometer chips for Apple and other customers.
This is a remarkable achievement for SMIC, which was put on a U.S. trade blacklist in 2020, cutting it off from key foreign technology that would allow it to make more advanced chips.
The U.S. has also pressured other countries, such as the Netherlands, to restrict the export of advanced semiconductor equipment to China. One of the most critical tools is the Extreme Ultraviolet (EUV) lithography machine, made by ASML, which is essential for making the most advanced chips at scale and cost-effectively.
So how is SMIC doing this?
SMIC is using its existing stock of U.S.- and Dutch-made semiconductor equipment, along with domestic tools and outside expertise, to produce 5 nanometer chips. This is a risky and costly strategy, as it relies on older equipment that may not be able to produce high-quality chips at a high yield.
SMIC reportedly had to charge 40% to 50% more for its 5 nanometer and 7 nanometer chips than TSMC does at the same nodes.
But SMIC is not alone in its quest to boost China’s chip industry. The Chinese government has allocated billions of dollars to support the development of the semiconductor sector, which is seen as a strategic priority for national security and economic growth.
China also has a large pool of talent and research institutions that are working on chip design and manufacturing. Huawei, for instance, has been developing its own chip design capabilities, and has launched several smartphones with its own Kirin processors, made by SMIC.
China’s chip industry still faces many challenges, such as the lack of a reliable supply chain, the dependence on foreign intellectual property, and the competition from global rivals.
But it also has many opportunities, such as the huge domestic market, the growing demand for 5G and AI applications, and the potential for innovation and collaboration.
China’s chip industry may not be able to catch up with the U.S. and Taiwan anytime soon, but it is certainly not giving up.
In fact, as Huawei’s rotating chairman Eric Xu said, China’s chip industry will be “reborn” as a result of U.S. sanctions.