Huawei Technologies is increasing its purchases of domestic components for smartphones. On the new model, which went on sale in August, the proportion of parts made in China by value reached 47 per cent, up 18 percentage points from the model three years ago. Chips equipped with circuit lines 7 nanometers wide (a nanometer is 1 billionth of a meter), etc., are rapidly improving their technological strength under the U.S. government’s export controls.
With the help of research firm Fomalhaut Technology Solutions(Chiyoda-ku, Tokyo), Nihon Keizai Shimbun disassembled Huawei’s high-end model “Mate 60 Pro” launched in China in August and analyzed component costs. It also determines which company’s products each component is from and calculates the share of each country.
According to Fomalhaut’s calculations, the total cost of parts for the 60 Pro is $422. From the perspective of the share of countries, in the range that can be judged, China’s manufacturing accounted for 47%, the highest proportion. Compared with Huawei’s Mate 40 Pro, a smartphone of the same price launched in the fall of 2020, when the impact of U.S. regulations is still slight, the proportion of Chinese-made components has increased by 18 percentage points.
From the perspective of OLED Display suppliers with the highest unit price, 40 Pro is South Korea’s LG Display, and 60 Pro is changed to China’s BOE Technology Group (BOE), which has a prominent impact.
Boe is breaking the monopoly of LG and Samsung Electronics in the smartphone display market by improving quality, but it still lags behind Korean companies in mass production capacity. Fomalhaut representative Boweinanzhuang said, “the question is to what extent we can supply Huawei when its shipments recover.”
Touch-screen related products made by Synaptics in the United States on the 40 Pro were changed to Chinese-made products on the 60 Pro. With the increase of Chinese parts and the improvement of functions, the Chinese parts of the 60 Pro totaled $198 by amount, an increase of 90% over the 40 Pro.
Production of 7nm chips using older equipment
The 60 Pro supports the high-speed communication standard “5G”. Since its launch, more and more people believe that its master chip uses the 7nm product made in Chinese Mainland. Previously, it was thought that this semiconductor could only be produced by large enterprises in Taiwan, South Korea and the United States, and it was difficult for enterprises in Chinese Mainland to develop it.
In fact, although the main control chip of the 40 Pro launched in 2020 uses a 5-nanometer chip designed by Huawei subsidiary Hisilicon, production is entrusted to TSMC.
Fomalhaut concluded based on this disassembly investigation that the main control chip of the 60 Pro is a 7-nanometer product designed by Hisilicon Semiconductor, and its manufacturing is handled by China’s SMIC.
SMIC International is considered to have used outdated equipment that is not subject to US export controls in semiconductor lithography equipment that belongs to the core of the manufacturing process. According to Boweinanzhuang, by slightly staggering the position of the substrate and repeatedly irradiating the light, even old-fashioned devices can form circuits equivalent to 7 nanometers on silicon wafers.
Due to the different usage methods from typical semiconductor lithography equipment, manufacturing efficiency and yield may decrease. A source at a Japanese semiconductor manufacturing equipment company said, “it seems that they did not think much about profit in order to show China’s manufacturing capabilities.”
Apple’s iPhone, which is often equipped with the most advanced technology, was first equipped with a 7-nanometer chip in 2018. Boweinanzhuang said, it is surprising that China has caught up in just five years, even though it was thought to lag behind by seven years if China adopted its own technology.
Japanese companies’ share of components has fallen sharply
In the dismantling survey of the 60 Pro, the share of components by value of Japanese companies fell to 1 percent, a significant drop compared to 19 percent for the 40 Pro. The camera’s image sensor was changed from SONY to Samsung, which had a big impact. On the other hand, the share of South Korean companies reached 36 percent, an increase of 5 percentage points compared with the model three years ago.
Huawei’s smartphone business, which fell due to US export controls, is recovering. According to U.S. research firm IDC, the share of smartphone shipments in China from April to June 2023 was 13 percent, recovering 6 percentage points from the same period last year. Huawei’s smartphone business is likely to regain momentum in China as it paves the way for cutting-edge semiconductor purchases.
Is there a gap in US regulation?
Before announcing its new Mate 60 Pro model, Huawei was thought to be making smartphones using electronic components it had purchased in bulk before the United States imposed export controls. The rapid development of China’s semiconductor manufacturing capacity beyond U.S. export controls has caused a shock to the United States.
The ban on the export of high-tech machinery and software to China will be fully implemented in 2019. In 2020, companies outside the United States will also be targeted, so Huawei should not be able to purchase high-performance chips such as cpus and memory chips.
Canadian research firms and others have also claimed that the 60 Pro, which went on sale in August, is equipped with a main controller chip with a 7-nanometer circuit width made by SMIC. In the US, views are growing that loopholes in export controls have allowed SMIC to produce cutting-edge products.
In order to prevent China from producing chips with a width of less than 14 to 16 nanometers, the United States has imposed strict restrictions on the export of equipment and technology used in manufacturing cutting-edge semiconductors to China. However, the old manufacturing equipment used to produce general purpose semiconductors with wider circuit width is not included in the regulation.
The Center for Strategic and National Studies (CSIS), a U.S. think tank, believes that manufacturing equipment imported by SMIC for use in 28 nanometers may actually be used to produce 7 nanometers. In a report released in October, CSIS said it had “failed to reduce China’s technological capabilities” and called for tighter controls.
In the United States, wariness about China’s semiconductor manufacturing capabilities is growing. The US Congress is also beginning to call for open source technologies that can be used to design and manufacture semiconductors to be subject to export controls. The confrontation between China and the United States over cutting-edge technology is deepening.
Source: Nikkei