New insider info suggests that Chinese tech giant Huawei Technologies Co. and Semiconductor Manufacturing International Corporation (SMIC) used US technology to manufacture a highly advanced chip in China last year.

According to people familiar with the matter, SMIC, based in Shanghai, used equipment from California-based Applied Materials Inc. and Lam Research Corp. to produce a cutting-edge 7-nanometer chip for Huawei in 2023 (via Bloomberg).

China's Struggle to Achieve Chips Self-Sufficiency

Despite China's efforts to achieve tech self-sufficiency, the reliance on foreign components and equipment for crucial products like semiconductors remains evident. US technology in this chip production underscores the challenges China faces in replacing certain foreign inputs.

The chip, hailed as a significant achievement in indigenous semiconductor fabrication, powered Huawei's Mate 60 Pro and contributed to a surge in smartphone purchases in China. Although the chip is not on par with the top components from global firms, it represents progress beyond what the US had hoped to hinder China's advancement in semiconductor technology.

Notably, the machinery utilized in the chip's manufacturing process also had foreign origins, including technology from Dutch company ASML Holding NV and equipment from Lam and Applied Materials. This reliance on foreign technology highlights China's ongoing efforts to catch up with international standards in chip manufacturing.

Despite the strides made by Chinese chip equipment suppliers like Advanced Micro-Fabrication Equipment Inc. and Naura Technology Group Co., they still lag behind their American counterparts in terms of sophistication and comprehensiveness. 

Shanghai Micro Electronics Equipment Group, China's top lithography system developer, also trails behind industry leader ASML in technology advancement.

US-China Tech Tensions

The revelation regarding the use of US technology in Huawei's chip production comes amidst escalating tensions between the US and China in the tech sector. Both Huawei and SMIC have been blacklisted by the US over alleged ties to the Chinese military, leading to restrictions on their access to US technology.

Following the Mate 60 Pro release, the US initiated a probe into Huawei's processor, citing concerns about national security. The Department of Commerce officials have expressed skepticism about SMIC's ability to produce 7nm chips at scale without access to advanced lithography systems from companies like ASML.

Amidst these developments, the US is pushing its allies, including the Netherlands, Germany, South Korea, and Japan, to tighten restrictions on China's access to semiconductor technology. 

However, this effort faces resistance in some countries, as it poses challenges to international trade while Chinese businesses are ramping up investments in equipment and computational power to compete in the artificial intelligence race.

Huawei's role in China's pursuit of AI chip development has also garnered attention. Jensen Huang, CEO of Nvidia, has identified Huawei as a 'formidable' rival in this arena, suggesting that the company may play a crucial role in China's efforts to challenge the US dominance in AI technology.

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