China’s safe landing in the chip territory

Kim Dong-ho

The author is the economic news editor at the JoongAng Ilbo.

The United States is responding tensely to the latest release of a flagship 5G smartphone by blacklisted Huawei Technologies, powered by chips processed on 7-nanometer fabrication. The Huawei Mate 60 Pro uses Kirin 9000s processors developed specifically for Huawei by Chinese foundry Semiconductor Manufacturing International Corporation (SMIC). The breakthrough means that China was able to circumvent the heavy U.S. sanctions aimed at preventing China from advancing beyond 14-nanometer chips to establish its own chip supply chains.

The U.S. has been clamping down on the rise of China’s chip and technology since 2018. The Donald Trump administration first targeted the world’s largest telecoms equipment manufacturer that supplies wire network equipment to the Chinese military. The U.S. arrested Huawei’s CFO Meng Wanzhou — the daughter of Huawei founder Ren Zhengfei — on Dec. 1, 2018 in Canada on the allegation that the company evaded sanctions against Iran. She was able to return to China after 1,028 days of detainment in Canada.

Multiple U.S. sanctions to bar high-tech parts and equipment shipments to China over the last five years were believed to have helped contain China’s further advancements in technology — until the latest smartphone surprise. Dan Hutcheson — vice chairman of TechInsights that discovered the 7-nanometer chip behind the Mate 60 Pro — described the breakthrough as China’s success in making technological progress even without the extreme ultraviolet (EUV) lithography used to produce cutting-edge microchips. In short, you must not underrate the remarkable leap of China’s chip technology.

The U.S. government chose disbelief. Commerce Secretary Gina Raimondo said there was no evidence that China had the ability to mass-produce 7-nanometer chips. But the news has already rattled the tech world. Apple decided to freeze the price of its latest iPhone 15 against the rivalry of new 5G phones from Huawei. Qualcomm, which has massively supplied Huawei with chips, suffered an alarming sales plunge due to the loss of its major customer to the Chinese chip supplier.

The development sounds loud alarms for Korea Inc. Samsung Electronics has stayed casual about Huawei’s 5G phone release, as it is already moving to the 2-nanometer class chips. Samsung still believes China can’t catch up as it doesn’t have access to EUV equipment. Such complacency reminds me of the backfire from ridiculing Chinese products as copycats. When China released its first smartphone in 2012, Korea called it as “a mistake of the mainland.” But the shame fell on Korean smartphone producers. Samsung Galaxy smartphones now hold less than 1 percent share in the Chinese market. Chinese phone brands have stretched out to dominate the Indian and African markets today.

During this year’s high-tech show IFA in Berlin, held earlier this month, Chinese enterprises outshined Korean counterparts. They flaunted the world’s largest display panels and the thinnest foldable phone. Chinese electric vehicles also stole the global motor show held earlier this month. Amid the hype, the European Union on Sept. 14 vowed to launch an investigation of China’s EV subsidies. This implies the uncomfortable truth that the only way to beat China’s advances in technology and its knack for churning out cost-competitive products is to build trade barriers. The Chinese economy may be stumbling on the slump in domestic demand, but its advances in technology keeps moving forward.

The U.S. also will resort to stronger sanctions. But China may already have outwitted Western countries to achieve the goal of “Made-in-China 2025,” or manufacturing high-tech products on par with advanced countries by 2025. China may already have localized chipmaking capabilities. Its advance into a 7-nanometer chip cannot be underestimated just because it was made using deep ultraviolet (DUV) lithography instead of the EUV lithography. China can meet most of the mass-market chip demand if it has the 7-nanomter capacity.

China has been investing in chip technology for 30 years. All the visiting premiers from China used to tour Samsung’s semiconductor fabs. They have long done away with the habit to suggest its confidence in having localized the chip ecosystem. Meanwhile, Korea is loosely holding onto its dominance. Japan has jumped back in the chip war while Intel is advancing toward the 1.8-nanometer technology. To stay in the lead, Korea must continue to churn out more advanced chips. Technology evolves. Korea can only run faster when it beats the competition.