{SMIC was long considered a laggard. Despite being the recipient of billions of dollars from the Chinese government since its founding in 2000, it remained far from the technological frontier. But that perception — and the self-assurance it gave the US — is changing.
In August 2023, Huawei launched its high-end Huawei Mate 60 smartphone. According to the Center for Strategic and International Studies (an American think tank based in Washington DC), the launch “surprised the US” as the chip powering it showed that Chinese self-sufficiency in HiSilicon’s semiconductor design and SMIC’s manufacturing capabilities were catching up at an alarming pace.
More recent news that Huawei and SMIC are scheming to mass-produce so-called 5-nanometre processor chips in new Shanghai production facilities has only stoked further fears about leaps in their next-generation prowess.
These chips remain a generation behind the current cutting-edge ones, but they show that China’s move to create more advanced chips is well on track, despite US export controls.
The US has long managed to maintain its clear position as the frontrunner in chip design and has ensured it was close allies who were supplying the manufacturing of cutting-edge chips. But now it faces formidable competition from China, whose technological advance carries profound economic, geopolitical and security implications.}
{The hypothesis has been that HiSilicon and SMIC would continue to stumble as they attempt self-sufficiency at the frontier. The US government has called on its friends to adopt a unified stance around excluding chip exports to China. Notably, ASML, a leading Dutch designer, has halted shipments of its hi-tech chips to China on account of US policy.
Washington has also limited talent flows to the Chinese semiconductor industry. The regulations to limit the movements of talent are motivated by the observation that even “godfathers” of semiconductor manufacturing in Japan, Korea and Taiwan went on to work for Chinese chipmakers — taking their know-how and connections with them.
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Finally, the US government has explicitly targeted China’s national champion firms: Huawei and SMIC. It banned the sale and import of equipment from Huawei in 2019 and has imposed sanctions on SMIC since 2020.}
{The “chip war” is about economic and security dominance. Beijing’s ascent to the technological frontier would mean an economic boom for China and bust for the US. And it would have profound security implications.}
