Huawei boosts China in chip wars

The war between China and the United States in the field of chips is one on which global technological dominance could depend. Dozens of technology companies, both Asian and Silicon Valley, would be on the brink if Beijing achieves its goals.

Until a few years ago, China’s semiconductor manufacturing capabilities were almost nonexistent. Despite the technological strength that forms the basis of the world’s second-largest power, most of this development depends on the outside world. By the 2010s, China imported almost all of the chips for its industry.

Such a situation could not be at all comfortable for the authorities of a country that aspires to be the first superpower. The birth of the “Made in China 2025” plan was the condensation of all the communist country’s aspirations for technological self-sufficiency. Setting up its own semiconductor industry is no easy task, but Beijing is willing to pay any amount to achieve it.

The latter has set off alarm bells in the United States. For the Western ruling castes, it is mandatory to stop China’s development at all costs. Thus, the Asian country pushing hard, on the one hand, and on the other hand its American rival trying to contain it. That is the most important war of our days, even bigger than the war in Ukraine.

The chip war went public with an aggressive discourse

From the moment China realized it needed to manufacture chips of its own, the conditions for war appeared. Three days before Donald Trump’s official ascension as US president in 2017, the first Chinese leader, Xi Jinping, gave a particular speech. The scene was the World Economic Forum in Davos where Xi made statements that few understood at the time.

The room, full of billionaires and top executives, respectfully applauded a speech that did not fit with China’s backwardness in key areas. However, the Asian leader remarked: “no one will emerge victorious from a trade war”. He also spoke of “a dynamic growth model led by innovation”. Three days later, Trump (who did get the message) launched an explosive speech directed at “other countries that make our products, steal our companies and destroy our jobs”.

A few months before Davos, during a meeting between the Communist Party and leaders of the technology sector, Xi was far from moderate. At that time he called for “winning spaces in fundamental technology as quickly as possible.” In the same tone, he spoke of “taking the technology fortress by storm.”

The U.S. response was firm and is getting stronger all the time. In that sense, the trade war initiated by the Trump administration took on new dimensions during the current Democratic administration. The most recent episode was the ban on trading semiconductor technology with China. It was a low blow for the Beijing authorities.

The U.S. initiative was backed by its European and British allies and also by Japan (a total of 41 countries joined in). At this stage of the chip war, the Western oligopoly is trying to stifle its rival so that it cannot break away from its technological dependence.

The impact of the prohibitive measures

One of the technologies that China will not receive from its competitors is electronic design automation, or EDA. In earlier times, when chips contained thousands of transistors, chip designs were done by hand. But those times are long gone and now small parts are made up of billions of transistors. EDA technology comes to do that job and therefore its importance is immeasurable.

With this one can get a sense of the importance of EDA for China and the damage of the U.S. ban. The alternatives for Beijing are few, given that only three companies in the world produce this software: Cadence (USA), Synopsys (USA) and Mentor Graphics (from the USA, but recently acquired by the German Siemens). The level of US dominance of EDA is as strong as that of lithographic machines, also essential for the creation of chips.

With this, it can be said that China is on the ropes unless it is able to create its own EDA. This is where Huawei came into play, having developed its own EDA software with which it could create semiconductors. According to local media reports, this development allows breaking, at least in part, the country’s dependence on foreign powers in the chip industry.

EDA software is commonly referred to as the “cradle” of integrated circuits to emphasize their importance. In any case, Western pressure measures seem to stimulate rather than stifle the Asian country’s technological development. It should not be lost sight of the fact that China is a nation of 1.3 billion people with plenty of potential to succeed in the chip war.

A rudimentary EDA that is not to be scoffed at

It is worth noting that the software designed by Huawei allows China to design chips above 14 nanometers. These are old-fashioned chips, considering that many technological products currently use 3 nm chips. But this breakthrough, however rudimentary it may seem, shows that China already knows how to do it and now its task is not to create the technology, but to upgrade it.

Trade sanctions in the area were expected to have long-term effects, when China will want to create more futuristic technological equipment. Thus, after the ban, the West’s task was to prevent Beijing from finding a way to manufacture its own EDA. But news of the achievement came faster than expected. Huawei’s confirmation of the development is a serious matter for U.S. authorities to deal with now.

It is nothing less than a breakup of the monopoly in the sector, which would jeopardize the global business that dominates Silicon Valley. The moment the authorities achieve the creation of 8 or 5 nanometer chips, there will be no turning back. At that stage, Russian and Chinese weapons factories will have state-of-the-art technology that would level up the major armies.

This last fact means that China’s current breakthrough in chip warfare, though rudimentary, is not seen as a source of derision. On the contrary, the nations that are more advanced in this field probably see this new development as a threat that requires greater efforts in terms of pressure on the authorities of the communist power.

China is in a race against the clock to win the chip war

Although the People’s Republic’s recent achievements sparked nervousness among its rivals, China’s path is complex. In other words, the EDA shipment ban sanctions are not a problem for the country at the moment. This is because local manufacturers are not advanced enough to use tools such as gate all-field effect transistors (GAAFETs).

However, the pace of technological development will mean that Chinese companies will soon need these more advanced tools. All this suggests that Beijing must accelerate access to this technology to prevent the gap with its rivals from continuing to widen.

It is stressed that this is only one part of the problem facing the country going forward. The other outstanding issue is even more difficult. It is access to lithography machines or hardware. By their very nature, these machines can be easily traced and prevented from reaching China. Getting them on the black market, or by self-development, will not be easy at all.

The situation changes when it comes to accessing EDA software, since the more advanced ones can be hacked. So far, the chances of victory in this chip war seem to be in favor of the United States. But China’s strength, drive and resources to achieve this critical technology should not be underestimated. Moreover, its future as a world power depends on it, so it should be expected to make the best efforts.

For U.S. companies and those from nations that joined the sanctions, the news is bad either way. As already stated, the success of the “Made in China 2025” plan would mean huge losses and even bankruptcies among firms engaged in semiconductor manufacturing. At the other extreme, sanctions also cause severe damage.

For these companies, the possibility of losing the Chinese market is negative. The Asian country is a revenue-supporting customer for many companies.