China's Huawei returning to 5G phone market with SMIC chips

Amanda Liang, Taipei; Vyra Wu, DIGITIMES Asia 0


Over the past two weeks, Reuters and Nikkei Asia have closely monitored the rumors surrounding a potential collaboration between Huawei and SMIC (Semiconductor Manufacturing International Corporation) to undertake mass production of 5G chips by the end of 2023. The purpose of this joint effort would be to support Huawei's flagship smartphones and facilitate the company's return to the 5G market in 2024.

The question arises as to whether the collaboration between Huawei and SMIC in developing 5G chips is a challenging endeavor. The specific challenges may lie in either the design aspect or the production aspect.

It is worth noting that Huawei had already taken significant steps in the 5G chip development arena. In September 2019, the company officially unveiled its flagship Kirin 990 5G chip during the IFA event. At that time, the Kirin 990 5G chip was acclaimed as the world's first 5G system-on-chip (SoC) and was manufactured using TSMC's cutting-edge 7nm EUV advanced process. The Kirin SoC was notable for integrating the Balong 5000 chipset.

From a technological and patent perspective, Huawei's HiSilicon has successfully developed and designed Balong, and seamlessly integrated it into the Kirin 990 5G. However, when it comes to practical implementation, Huawei is encountering obstacles due to TSMC's limitations caused by export control regulations amid the US-China tech war, which has resulted in a disruption in collaboration with HiSilicon. Now, if Huawei intends to re-enter the 5G smartphone market, apart from obtaining chips from Qualcomm and MediaTek, the company has limited choices: it can either lead the Kirin SoC's comeback or utilize the Balong 5000 Chipset as an external add-on alongside a separate application processor (AP). In terms of production and execution, Huawei's reliance is primarily on SMIC for manufacturing. Regarding the current chip procurement options, they are restricted to 4G chips. Considering the initial disruption to TSMC's manufacturing pipeline and the limitations on 5G chips from Qualcomm, MediaTek, and even Samsung Electronics, Huawei had to invest considerable time and effort in seeking a solution with SMIC to produce 7nm chips without TSMC services.

It is important to highlight that incorporating an external 5G modem chip into a smartphone not only leads to unstable signals but also causes additional power consumption for the device. Contrasting this with Samsung's difficult experience in manufacturing their own and Qualcomm's 5G chips, Huawei had actually succeeded in integrating the modem chip and SoC in the Kirin 990 5G. However, replicating what TSMC could achieve presents a challenge for Huawei in executing this with SMIC. The amount of time required by Huawei to accomplish this task remains uncertain.

In the summer of 2022, after TechInsights, a research institution, dismantled a mining client's chip using SMIC's 7nm process, the fact that the company had the capability to advance to the 7nm node became increasingly evident. Although SMIC never officially confirmed this, and even though the Chinese media initially reported on this with excitement, the information mysteriously disappeared from Chinese internet platforms. However, one year later, recent reports in the Chinese media about Huawei and SMIC collaborating to produce 7nm 5G chips have once again sparked enthusiasm, reflecting the backdrop of the ongoing US-China tech competition.

This raises questions about whether, in response to the Biden administration's approach towards containing China compared to the Trump administration, Beijing authorities will take countermeasures. Notably, in mid-July, SMIC's former Chairman Gao Yonggang resigned and Liu Xunfeng, recommended by the Big Fund, took over. This indicates that Beijing authorities may now have a greater say in influencing SMIC's direction. In contrast to SMIC's previous low-profile approach of avoiding direct confrontations with the US, the current collaboration between SMIC and Huawei on 7nm 5G chips can be seen as a subtle form of challenge.

In the past, TSMC utilized the 7nm EUV process for manufacturing Huawei's Kirin 990 5G chip. However, currently, SMIC can only achieve 7nm mass production through DUV with multiple exposures. Considering SMIC's yield, capacity, and Huawei's internal use-only business model, it is projected that SMIC's 7nm process is constrained by low yields and limited capacity, prioritizing functionality over pursuing high production volumes. This raises the question: even if Huawei's 5G chips, whether SoC or modem chips, make a comeback, would best-case scenario be to supply solely for in-house needs? In a less favorable situation, it is feared that SMIC might only be able to symbolically supply certain device models.

The widespread adoption of Huawei's 5G chips by brands like Honor, Oppo, and others in China hinges on two key factors: Huawei's approval and whether the performance and heat dissipation capabilities of the SoC or 5G chips manufactured by SMIC can compete with Qualcomm and MediaTek's 5G solutions. While the deal to manufacture Huawei's 7nm 5G chips holds strategic importance in China's advanced chip manufacturing, achieving commercial-scale profitability for SMIC might pose challenges. Moreover, the release of Huawei's 5G chips in 2023 or 2024, along with the launch of their 5G smartphones, will inevitably showcase SMIC's capabilities in the 7nm process. This could have implications for SMIC's future orders and equipment deliveries from semiconductor equipment manufacturers in the US, Japan, and the Netherlands. Ultimately, the profitability of the cooperation between Huawei and SMIC in producing 7nm 5G chips remains uncertain.