Because Chinese firms no longer have access to the most cutting-edge machines for making semiconductors, they have developed novel workarounds that use older machinery to create more powerful chips. But these methods are both relatively time-consuming for manufacturers, and produce a higher proportion of faulty chips, limiting the scale of production.
“This does not mean China can manufacture advanced semiconductors at scale,” said Paul Triolo, an associate partner for China and technology policy at Albright Stonebridge Group, a consultancy. “But it shows what incentives U.S. controls have created for Chinese firms to collaborate and attempt new ways to innovate with their existing capabilities.”
”It is the first major salvo in what will be a decade or more struggle for China’s semiconductor industry to essentially reinvent parts of the global semiconductor supply chain without U.S. technology included,” he added.
Nazak Nikakhtar, a partner at Wiley Rein and a former Commerce Department official, said that Huawei’s progress was “a result of longstanding U.S. policy” — specifically U.S. licenses that allow companies to continue selling advanced technologies to firms that the Commerce Department placed on a so-called entity list, like Huawei and SMIC.
From Jan. 3 to March 31, 2022, the Commerce Department approved licenses for the sale of $23 billion of tech products to companies on the entity list, according to information released in February by the House Foreign Affairs Committee.
“Where gaps exist in licensing policies, exports will get funneled through the gaps. The U.S. government needs to close the gaps if its intention is to limit exports of critical technologies to China,” Ms. Nikakhtar said.
Claire Fu contributed reporting.