Headline, January 12 2024/ ''' CHIP WARS CHIC '''

''' CHIP WARS CHIC '''

SEMICONDUCTORS WILL REMAIN CENTRAL to America's technology rivalry with China.

AS SOON AS THE HUAWEI MATE 60 PRO handset went on sale on August 29, technologists raced to smash it open and see how it worked. The Chinese telecoms-equipment maker had somehow succeeded in creating a new 5G smartphone - something few thought it could accomplish.

Huawei had been forced to give up making such devices in 2020 after American sanctions blocked it from buying advanced semiconductors or the equipment needed to make them. 

Sales of Huawei smartphones, which at one stage outsold Apple's iPhones globally, collapsed. Yet as they sifted through the innards of the Mate 60 Pro, engineers discovered a Chinese made chip that seemed to show that American sanctions had been overcome by indigenous innovation.

THIS CHIP, the Kirin 9000S, was manufactured by SMIC, the leading Chinese chipmaker, and its appearance was a deeply symbolic moment.

China's tech war with America began in earnest in 2019 when Donald Trump's administration banned the sale of high-end chips to Huawei. In 2022 President Joe Biden built on the framework of those sanctions to introduce a blanket ban on the sales of advanced semiconductors to all companies in China.

Since then leaders in Beijing have retaliated by banning the sales of some chips made by Micron, an American firm, to Chinese companies on security grounds. They also began restricting exports of gallium and germanium, two rare metals needed to make state-of-the-art chips.

Huawei's new phone and the chip that powers it, are thus seen in China as signalling a paradigm shift. '' People can see from this that American sanctions cannot stop China's technological progress,'' read an editorial on Sept 12th in the People's Daily, a government mouthpiece.

Photos on local social media showed children bowing in front of Huawei ads in Shenzhen. In America, the Mate 60 Pro was used as evidence both to argue that sanctions on China were failing and should be abandoned and to argue that they should be tightened.

In fact, it highlights just how difficult it will be for Huawei and other Chinese firms to make new breakthroughs in 2024 and beyond.

The performance of the Mate 60 Pro is in a par with Samsung Galaxy S20, a handset released in 2020 and powered by a chip manufactured by TSMC of Taiwan, the world's leading chipmaker.

Being three years behind may not sound like a lot, but SMIC is using a previous generation of lithography machines, based on a technology called DUV, to etch the chips.

Industry observers reckon that the Kirin 9000S represents the limit of DUV technology. TSMC's superior chips are made using more advanced  EUV technology. And that is off-limits to SMIC and other Chinese chipmakers because EUV machines are made only by ASML, a Dutch company, and are covered by American sanctions.

Impressive as it is, in short, the Kirin 9000S probably marks the boundary of what China can achieve without technology, which it will have to develop on its own. That is likely to take many years - and TSMC will continue to race ahead in the meantime.

The Mate 60 Pro is not the decisive blow in the tech war that it seemed. And other aspects of the phone's innards signal the direction the tech war will take in 2024.

The handsets were found to contain memory chips made by SR Hynix, a South Korean firm. It says it has not done business with Huawei in years. But Chinese companies have found clever workarounds to get their hands on chips via underground markets.

For this reason, America is likely to step up global enforcement of its sanctions. The Biden administration has already dragged allies such as Japan, the Netherlands and South Korea into the fight, to the displeasure of companies in those countries.

IN 2024 it may expand that group, perhaps in places such as the Middle East, where Chinese firms are rumoured to be buying chips.

That may hamper Chinese firms' ability to create new high-tech products from smartphones to the specialised systems to train A.I. models. But it will also sap the patience that America's friends have for its tech war.

The Honour and Serving of the Latest Global Operational Research on Chips & Wars, continues. The World Students Society thanks The Economist.

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