But the sanctions also cut HiSilicon off from the global network of factories (called “foundries” or “fabs” in the semiconductor industry) that are vital in manufacturing and testing the products. TSMC, the Taiwanese chip fab that was making chips for HiSilicon at the time, stopped supplying it in 2020.
This further narrowed the options for Huawei. It could only turn to Chinese fabs, and that was a costly and time-consuming process. “Anytime you’ve designed a chip in a fab and then, for some reason, you cannot source that anymore and move to another company, just that process of redesigning, qualification, and ramping production takes at least three years,” says Krishnaswamy, who also owns a chip company that works closely with fabs.
Then, making things even more challenging for Huawei, Chinese chip fabs were later put under sanctions and now can’t access any cutting-edge chip-making technologies.
So when Huawei made the smartphone with a new 5G chip earlier this year, Krishnaswamy says, the industry was surprised by how quickly it had been able to turn around a design, shift to a Chinese fab, manufacture the new chip, and get it to production rate, all while having to deal with significant revenue losses caused by sanctions. “For Huawei to show [that it is] able to do that is definitely impressive,” he says.
Indeed, since news came out that it was making its own 5G chips in Chinese fabs with minimum overseas input, the company has become a source of national pride for many in China. For them, it’s an example of how US sanctions don’t always work as intended. They may force Chinese companies to adapt, move production back to China, and catch up in areas of tech where they had lagged—and that can ultimately work out in China’s favor.
Still, it may be too early for them to cheer, as there are other obstacles to clear before Huawei can become competitive in the high-end phone market again.