Huawei’s big comeback tests limits of US chip controls

{"text":[[{"start":9.65,"text":"When the US government moved in May 2019 to cut Huawei off from American chips, software and semiconductor manufacturing technology, most analysts saw it as a death sentence for the Chinese tech giant."}],[{"start":23.75,"text":"That night, He Tingbo, head of Huawei’s chip unit HiSilicon, circulated an internal letter calling the ban the “darkest of days”, but revealing that the company had spent almost a decade preparing for what she called an “extreme survival scenario”."}],[{"start":39.1,"text":"According to a copy of the letter seen by the FT, Huawei had developed backup chips across its product range in anticipation that foreign suppliers could one day be cut off."}],[{"start":50.400000000000006,"text":"For years, Huawei kept those efforts largely hidden. At a semiconductor conference in Shanghai in May, He told thousands of industry executives that the company had found a way around one of the biggest obstacles created by US export controls: China’s lack of access to the world’s most advanced chipmaking equipment."}],[{"start":null,"text":"

"}],[{"start":68.60000000000001,"text":"The announcement, centred on a chip-stacking approach designed to boost computing performance without the latest manufacturing tools, was described by Bernstein analysts as another “DeepSeek moment” — a reference to the AI lab whose models challenged assumptions about the gap between China and Silicon Valley under export controls."}],[{"start":86.55000000000001,"text":"Huawei’s comeback has become one of the most consequential stories in the US-China technology battle. Seven years after being written off by many in the industry, the company is betting it can advance China’s push for semiconductor self-sufficiency and challenge assumptions about the effectiveness of US efforts to contain its technological rise."}],[{"start":105.45000000000002,"text":"This account of Huawei’s effort to rebuild its semiconductor business is based on interviews with more than a dozen employees, business partners and industry experts, as well as previously unreported details of semiconductor projects obtained by the FT."}],[{"start":null,"text":""}],[{"start":120.50000000000001,"text":"He, now 56 and nicknamed China’s “chip queen”, presented Huawei’s logic-stacking technology, which folds chip circuits into multiple layers to increase computing performance without relying on ever-smaller transistors."}],[{"start":135.3,"text":"China is barred from acquiring EUV lithography machines, the most advanced chipmaking tools produced by Dutch group ASML. Many analysts believed this restriction would prevent Chinese chipmakers from moving beyond 7 nanometre-generation processes, widely seen as the limit of what can be achieved using older equipment."}],[{"start":155.75,"text":"“It breaks the core narrative that because of export controls China’s semiconductor is dead at 7nm,” said Lin Qingyuan at Bernstein. “Huawei needed to demonstrate it works also to show the government that it isn’t wasting money and has a future.”"}],[{"start":170.85,"text":"Huawei believes the technology is ready for smartphone chips due to launch later this year, according to people familiar with its plans. Significant challenges remain, however, including power consumption, overheating and whether manufacturing yields can reach commercially viable levels."}],[{"start":187.85,"text":"The hurdles are greater in AI chips for data centres. He said in Shanghai that the technology would not be ready for AI processors until 2030. This is down to the engineering complexity involved in stacking more layers of denser logic and memory chips, according to industry experts."}],[{"start":null,"text":""}],[{"start":206.04999999999998,"text":"Huawei is pursuing a second workaround: compensating for weaker individual chips by linking large numbers of them together into powerful computing clusters. Drawing on expertise built up in telecoms networking, its CloudMatrix 384 platform connects hundreds of AI processors into a single system that the company says outperforms Nvidia’s widely used NVL72 in overall computing power and memory — a strategy designed to offset weaker chips through sheer scale. "}],[{"start":234.85,"text":"Huawei is aiming for much larger clusters with its latest AI chips, which it hopes will be capable of AI training work, people with knowledge of the plan said."}],[{"start":244.5,"text":"The concept of using advanced packaging and 3D chip designs is not unique to Huawei. Chipmakers including TSMC explored similar approaches years ago, while several Chinese start-ups are developing AI chips built around comparable concepts, according to investors in the sector.Some of these start-ups are preparing prototypes this year that could achieve performance equivalent to Nvidia’s B200 chips if successful, the investors said, though such products will not enter production until mid-2027 at the earliest."}],[{"start":277.5,"text":"Critics believe that western companies could deploy the same techniques on top of more advanced chips, preserving their lead. Supporters argue that western chipmakers have little incentive to develop such technologies now due to the significant R&D cost while they can still use EUV to shrink transistors. "}],[{"start":296.75,"text":"China is seeking a head start in stacking technology which it hopes to combine with future domestic alternatives to western lithography tools, eventually allowing it to leapfrog competitors, industry experts said."}],[{"start":309.25,"text":"While China’s domestic AI chips are currently at least two generations behind Nvidia’s most advanced products, they are outperforming those available for sale to China under the US export control in certain aspects, according to data compiled by Morgan Stanley analysts. "}],[{"start":null,"text":""}],[{"start":325.4,"text":"China’s chipmakers, led by Huawei, are seeing a sharp rise in demand as domestic technology groups adopt products they previously avoided because of weaker performance and more difficult software."}],[{"start":337.5,"text":"“Now not only Huawei but almost every Chinese AI chipmaker is sold out due to surging demand for inference,” said one procurement executive at a leading Chinese tech company. “Products improve only when more people start to use them and make changes.”"}],[{"start":352.65,"text":"A bottleneck remains in manufacturing. US export controls prevent Chinese companies from using leading overseas foundries such as TSMC, leaving them dependent on domestic producers led by SMIC. Although SMIC is expanding advanced chip production and Huawei has dedicated manufacturing lines launching this year, demand continues to outstrip supply."}],[{"start":373.75,"text":"The shortage is one reason Huawei’s ambitions abroad remain limited for now. But the company has already begun marketing systems that combine its 950DT chips with DeepSeek’s V4 model to customers in the Middle East and Central Asia, according to people familiar with the matter. "}],[{"start":390.1,"text":"Its products could, in future, become attractive for countries with limited access to Nvidia’s chips due to export controls, in another challenge to US tech dominance."}],[{"start":400.70000000000005,"text":"Huawei’s most significant achievement since US sanctions took effect may be convincing investors, policymakers and engineers that Chinese semiconductor independence is achievable."}],[{"start":411.80000000000007,"text":"On the sidelines of the Shanghai conference, He reflected on the years since the restrictions were imposed. When under pressure, she said, she often visits Dujiangyan, a 2,000-year-old irrigation system in Sichuan built by engineers who split mountains and reshaped rivers using the limited tools available to them."}],[{"start":431.30000000000007,"text":"“Dujiangyan reminds me of how an engineer should work under poor conditions,” she said."}],[{"start":437.05000000000007,"text":"Huawei did not respond to a request for comment."}],[{"start":440.05000000000007,"text":"With additional reporting from Xueqiao Wang in Shanghai"}],[{"start":450.6000000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781679430_4838.mp3"}