NEW YORK (BLOOMBERG, REUTERS) - Huawei Technologies plans to build a chip plant in Shanghai without using American technology, as China's biggest tech company by sales seeks a new strategy to overcome increasingly tight US sanctions, the Financial Times reported.
The fabrication facility is expected to start with the manufacture of low-end nanometer (nm) chips, the paper said on Sunday, citing people familiar with the project. Huawei aims to make 28nm chips for "Internet of things" devices by the end of 2021, and produce 20nm chips for 5G telecom equipment by late 2022, the report said.
Huawei has no experience in fabricating chips and the plant would be run by Shanghai IC R&D Center, a research company backed by the city's government, according to the report.
China has laid out a path toward greater economic self-sufficiency in its new five-year plans, and vowed to build its own core technology, saying it can't rely on buying it from elsewhere. One core area is semiconductors where China still lags behind leading producers including the US, South Korea and Taiwan.
The government’s aim is to increase the share of Chinese-made chips from the current 25 per cent to 70 per cent in five years. While the US controls technologies for high-precision chips, China has the capability and capacity to increase its production of low-precision chips. In fact, the bulk of industrial demand is for low-precision chips - 40nm chips or above account for nearly 80 per cent of the total demand for chips.
Huawei, meanwhile, has emerged as a focal point in deteriorating US-China relations with President Donald Trump’s administration alleging that its equipment could be used by Beijing for spying, which the Chinese company has denied repeatedly.
When escalating US restrictions cut off Huawei’s supplies of many overseas chips, the world’s largest telecoms equipment maker responded by building up stakes in Chinese semiconductor companies and other tech businesses to bolster its supply chain. An investment arm set up by Huawei in April 2019, has closed 17 deals for stakes in Chinese tech companies since August last year, records as of end-September show.
But while the investments might help Huawei in the future, analysts say they have done little so far to address the supply chain gaps that are undermining its once-booming smartphone business and could eventually threaten its core network equipment operations. Many of the businesses Huawei has backed are also at an early stage in their development.