TSMC and SMIC will be cut off for Huawei? Countermeasures are on the way

On the evening of May 15, the Industry and Security Bureau (BIS) under the US Department of Commerce announced a “plan aimed at protecting US national security” on Friday local time “, that is,” restrict Huawei’s ability to use US technology and software to design and manufacture semiconductors overseas “to prevent Huawei from bypassing US export controls.


huawei Mall

after a year, the United States upgraded again huawei sanctions

in May 15, 2019, the United States included China’s Huawei Company and its more than 70 affiliated companies in the “entity list” of export controls “, u.S. enterprises are prohibited from exporting any technology and products to Huawei without obtaining a license.

However, Huawei did not have the “immediate shock” like the US sanctions against ZTE. Instead, it fully enabled the “spare tire” and the previous large stock of key devices, it has resisted the US sanctions. And after nearly a year, Huawei in the base station, intelligent mobile phone and other key products have realized a large-scale replacement of U.S. chips. Although there are still a small number of U.S. devices in Huawei’s mobile phones, Huawei Terminal CEO Yu Chengdong has said many times, huawei has been able to completely use American chips. At the same time, Huawei has also launched its own Hongmeng operating system and HMS service on key software systems and services.

To this day, it is just the first anniversary of US sanctions against Huawei. The US sanctions against Huawei this year did not defeat Huawei. On the contrary, Huawei’s various businesses still withstood the pressure and maintained growth.

According to the 2019 annual report released by Huawei, the annual revenue was 858.8 billion yuan, up 19.1% year on year, and the net profit was 62.7 billion yuan, up 5.6% year on year. 0.24 billion smartphones were shipped, up more than 16% year on year. By the end of 2019, more than 85000 valid patents had been held worldwide. In addition, according to IPlytics, Huawei is the company with the largest number of declared 5G standard patent families in the world, reaching 3147 families.

Even under the influence of the epidemic in the first quarter, Huawei achieved a sales revenue of 182.2 billion yuan in first quarter of 2020, a year-on-year increase of 1.4%.

In the process, the United States is still increasing its pressure on Huawei. Up to now, 114 overseas affiliated companies of Huawei have been included in the “Entity List”.

Perhaps I feel that the previous measures to “block” Huawei have not achieved the expected results. On the first anniversary of the United States listing Huawei on the physical list, the United States has increased its code again, it is hoped that export controls will be implemented through stricter standards, thus restricting Huawei.

Over the past year, Huawei has continued to design semiconductor chips through the use of American software and technology, and to make chips through “overseas foundry factories using American equipment,” the BIS said, the purpose of violating the Entity List to ensure U.S. national security and foreign policy.

U.S. Commerce Secretary Wilbur Ross also said: “Although the U.S. Commerce Department listed Huawei on the’ entity list’ last year, Huawei and its foreign affiliates have also increased their efforts, to avoid the restrictive measures based on protecting the national security of the United States implemented by the United States through localization. This localization practice still relies on US technology. This is not what responsible global enterprises should do. We must revise the rules used by Huawei and Haisi Semiconductor to prevent US technology from being maliciously used in activities that violate US national security and foreign policy interests.”

in response, the U.S. Bank for International Settlements is revising its long-term implementation of the measurement standards and Entity List of direct products produced by foreign countries, which will be based on narrow and strategic rules, to restrict Huawei’s purchase of semiconductor products directly produced based on certain software and technologies in the United States.

Specific restrictive measures

specifically, this targeted rule change will bring the following foreign-produced products into compliance with the Export Administration Regulations (EAR):

△ in order to facilitate other public numbers to directly refer to the same content, image processing is done here.

As we all know, the original US export control to Huawei was mainly to restrict US manufacturers from providing Huawei with products and services based on US technology, at the same time, manufacturers outside the United States are restricted from providing Huawei with products and services containing more than 25% of technologies originating in the United States.

Now, from the above new regulations, we can see that the United States now completely does not care about 25% of the standards derived from American technology. The semiconductors designed or produced by Huawei and its affiliates, as long as it is a direct product that uses the software and technology on the US business control list, it will be restricted. At the same time, Huawei and its affiliates will be restricted even if they use some direct products produced by US semiconductor equipment outside the United States.

The United States has a dead hand. Is Huawei really going to be cold?

This is really a big deal! The United States really wants to completely kill Huawei!

Yang Jian, chief analyst of xinzhixun Research Institute, pointed out that the new US regulation is to prohibit Huawei from using US software to design chips, at the same time, Huawei is also prohibited from using American semiconductor equipment to produce chips through chip factories outside the United States. I am afraid that the two ends will lock up Huawei’s chips.

First of all, although Huawei has basically realized the replacement of American chips by using self-developed chips and non-American chips in base stations and terminal products, the most critical chip design, in particular, the design of high-end chips is still inseparable from the EDA software of the US department.

At present, the global EDA software supply is mainly the international giants Synopsys, Cadence and Mentor Graphic, which account for more than 60% of the global market. Among them, Synopsys and Cadence, which have the largest market share, are both American manufacturers. Although domestic EDA manufacturers have developed rapidly in recent years, there is still a huge gap with American manufacturers.

Since EDA software generally has a relatively long time (such as one year) of authorization, after the United States listed Huawei on the Entity List, in theory, Huawei can still use the EDA software of the US department to design the chip, as long as it is within the authorization period, although there is no technical support from the original factory.

However, with the passage of time, the authorization time limit for EDA software should be approaching. Therefore, we can see that on the evening of April 28, the Nikkei Asia Review quoted the news from two people familiar with the matter as saying that Huawei was cooperating with STMicroonics, a chip manufacturer, jointly design mobile and car related chips! However, through its cooperation with STMicroelectronics, Huawei is expected to use EDA software from American companies to design its own chips.

But now, according to the new regulations of the United States, as long as the chips designed by Huawei and its affiliated companies are directly designed by EDA software of American manufacturers, then they will all be restricted by the new US regulations. Obviously, this road has been blocked by new regulations.

Secondly, Huawei is a Fabless manufacturer. Even if the chips it designs do not use any American software and technology, they still need to be produced through chip factories such as TSMC and SMIC. If these chip factories use American semiconductor equipment to produce Huawei’s chips, they will also be restricted by the United States. In other words, if these chip factories do not want to find trouble, they cannot use American semiconductor equipment to produce chips for Huawei.

This is killing me again! At this stage, it is difficult to completely avoid American semiconductor equipment in semiconductor manufacturing.

According to statistics from VLSIResearch, the global sales of semiconductor equipment systems and services in 2018 was 81.1 billion US dollars, with the United States accounting for two of the top five equipment manufacturers, among them, American applied materials company ranked first with 17.72% market share, and American Pan forest semiconductor ranked fourth with 13.4% market share. The two together account for 31.12% of the global market share.

It can be said that both TSMC and SMIC have extensively used the equipment of these two US semiconductor equipment manufacturers. In addition, ASML, the second-ranked lithography giant, produces the core component of the lithography machine-the light source is also from the United States.

It can be said that Huawei chips cannot avoid American equipment at the manufacturing end. This time the United States is really going to kill Huawei!

Yang Jian, chief analyst of the core Intelligence Research Institute, also contacted TSMC insiders in the early morning of May 16 to ask whether the new US BIS rules will limit TSMC’s continued cooperation with Huawei. The other party gave a definite reply.

The other party said, “I only saw the news at night. Personally, I think there are two main new regulations this time: The first is to prohibit Huawei from using American software for design. The second is to restrict foundry factories outside the United States from using semiconductor equipment produced in the United States to produce chips for Huawei. (The original words are that a license is required, but it is basically impossible to get it). Literally, there is really no room left. But there is no time to ask the legal person.”

in addition to TSMC, the new US regulations may also limit SMIC and Huawei cooperation.

“Unless SMIC does not use American equipment to produce chips for Huawei at all, it can avoid the new US regulations. Although some domestic substitutes can be made in etching machines, PVD, CVD, cleaning machines, oxidation/annealing equipment, etc. at present, it is unrealistic to completely avoid U.S. semiconductor equipment.” Another fab insider told xinzhixun. This also means that if SMIC continues to use US equipment to contract chips for Huawei, it may also be subject to US sanctions.

In other words, Huawei’s self-developed chips have been blocked by the United States in both design and production! This is to waste Huawei’s self-developed chip.

So, is it possible for Huawei to break through the blockade of the new US regulations?

Yang Jian, chief analyst of xinzhixun Research Institute, believes that there is a possible way to avoid it. Huawei directly chooses to use chips from other domestic or non-American foreign manufacturers to replace self-developed chips. At least from the literal provisions of the new US regulations, this seems feasible. And before that, in addition to using self-developed chips, Huawei did use a large number of non-American chips such as domestic and Japanese and Korean chips to replace American chips. However, fundamentally speaking, the chips of other domestic or non-American manufacturers are still inseparable from the EDA software and semiconductor equipment of the United States. Is it feasible to bypass the new regulations of the United States, this power of interpretation is still in the US Department of Commerce.

For Huawei, I’m afraid this time it’s really a “life and death” moment. However, we don’t have to be too pessimistic, because there is still a turn for the better.

The turning point is still there, and the countermeasures are already on the way.

At present, the new regulations of the U.S. Department of Commerce against Huawei have not been formally implemented, and in fact, after the formal implementation of the new regulations, the United States has also left a buffer period of up to 120 days.

According to the new regulations, the U.S. Department of Commerce said, “in order to prevent direct adverse economic impacts on foreign manufacturers using U.S. semiconductor manufacturing equipment, these devices have started any production steps of the project according to Huawei design specifications before the [effective date of the rules], as long as these foreign-produced items are re-exported within 120 days from the effective date, exports or transfers from abroad (at home) are not subject to these new licensing requirements.”

that is to say, even after the new regulations for Huawei were formally implemented in the United States, wafer foundry manufacturers such as TSMC and SMIC have started production projects according to Huawei’s design specifications, as long as these produced chips are delivered to Huawei within 120 days of the new regulations taking effect, there is no need to apply for a license to the United States. This also means that even if the new US regulations are officially implemented, Huawei still has a 120-day buffer period. Then Huawei can use this 120 days to speed up the stocking, in order to be able to maintain a long enough time to survive after 120 days.

However, the sudden fierce action of the United States against Huawei should also be a chip made by the Trump administration in order to gain an advantage in the subsequent new stage of trade negotiations with China and the dispute over the new Crown epidemic, the 120-day buffer time may also be to negotiate with the Chinese government and force China to make concessions.

In any case, I believe that the country will not sit idly by the United States for Huawei’s bullying, and will not let the United States lead the nose. On the evening of May 15, the Global Times published an editorial article “Editorial: to fight back against the US, we must fight a protracted war”.

The article pointed out that according to the Global Times:

if the United States further “stuck its neck” with Huawei and prevented TSMC and others from supplying chips to Huawei, China will strongly fight back, including bringing relevant U.S. enterprises into the “list of unreliable entities”, according to law and regulations, Qualcomm, Cisco, apple such as US enterprises to restrict or investigate, suspend the purchase of Boeing aircraft, etc.

Source: Global Times

obviously, according to the information disclosed by the Global Times, China has prepared very tough counterattack measures to deal with the further “neck jam” of the United States against Huawei.

There is no permanent enemy between countries, only permanent interests. Only cooperation between China and the United States can achieve a win-win situation. I believe that the matter of Huawei can finally be properly resolved.

you dao shi, shan zhong shui fu yi wu lu, liu an hua ming you yi cun! While maintaining optimism, we should also clearly realize that “domestic substitution” is not only a slogan of beating chicken blood, it should be the goal that our generation of semiconductor people strive.

Author: xinzhixun-langke sword