China's chip industry: Huawei is rebuilding domestic production with partners


Huawei, one of the first and most prominent casualties of the US-China trade war, is rebuilding its domestic supply chain. For this, even older and unfinished plants from 2018 are brought to life, which should help Huawei to get back into the market.

Huawei, an up-and-coming and serious competitor to Western industry giants by 2020, was severely set back by the US sanctions against China. This was particularly visible in the smartphone: no more chips from TSMC or Sony, no more Google on the devices. A rapid crash in the business followed, and HiSilicon, Huawei's chips division, also went into freefall: from $8.2 billion in sales in 2020 to just $1 billion in 2021.

Already in September there were first indications of Huawei's efforts for a domestic and independent supply of components, now the picture is complete. In southeast China, an old factory is coming back to life in the port city of Quanzhou. Originally planned by Fujian Jinhua Integrated Circuit Co. (JHICC), an up-and-coming memory manufacturer in China, but shelved in late 2018, work resumed some time ago. A new customer is said to be responsible for this. Visiting the site, Nikkei found out that it was an open secret on the site that Huawei was behind it.

Completing the plant is not the only construction site on site. Virtually unknown in the West, Quliang Electronics, a manufacturer with a focus on packaging services, is building a huge new plant right next door to use the services of the same customer: Huawei.

Technology from the western world

But building factories out of the ground is only part of the game. Without the technology to equip them, they are of no use. And that's where the big catch lies, because this technology comes almost exclusively from Western companies. Well-known names such as ASML, Canon and Nikon precede their exposure systems, but the other technology from KLA, Applied Materials, LAM and others is also indispensable in many factories. Some of this technology is still being used, ASML was recently able to assert its own position against the USA and will continue to supply technology to China – the exception remains EUV equipment, which has existed for some time.

ASML, however, has a very good point of view: Without it, nothing would work in the semiconductor industry even in the western world, and so the USA is also dependent on the company. On the other hand, other suppliers such as KLA were hit hard by the new US restrictions on China in October. The group describes it as the “evacuation from Dunkirk in the chip industry”.

The day before the ban, these Chinese chipmakers were still [among] our most important customers. But the next day we had to pack our belongings and just walk away. No communication was allowed thereafter.


The Chinese chip industry currently has to make do with what it already has or can acquire indirectly. As a rule, these are machines for 28 nm chips or 40 nm products, SMIC also tried 14 nm. Recently it was even said that a 7 nm prototype had been developed, but how credible this information is remains doubtful. It is undoubtedly years behind TSMC's N4 process, which many industry giants are currently using.

Whether Huawei's efforts with the help of local industry and government will achieve success only the next few years will show. Since the USA is probably not yet at the end of its sanctions, a planned schedule can quickly not be met.