Behind Huawei chip’s fear of being cut off: China chip’s sad past and future

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By Hong Yuhan
Source: deep echo
Under the national system, China’s semiconductor industry can catch up with the United States, thanks to a group of semiconductor talents who returned to new China.
Since the 1980s, the gap between China and the international advanced level has been widened, which is not only due to internal reasons, but also closely related to the formation of various barriers in the global chip industry.
Under the wave of globalization, chip semiconductor has gradually become a global business with fine division of labor. The more enterprises born in the wave of Internet, the more open and imaginative space for the future.
heroically tragic.
If there is no accident, at this moment, according to media reports, Huawei is seizing no time to transport all Kirin chips from Taiwan just as the node where the United States will completely “cut off the supply” of Huawei chips on September 15.
This may be the last batch of Kirin chips supplied to Huawei. Since then, the performance of the chips applied to Huawei’s various terminals depends entirely on itself. Therefore, solemn and stirring is the emotional annotation set by the market for Huawei.
Facing the crisis, Huawei’s plan B is accelerating its implementation. Just a few days before the cut-off time, Huawei’s developer conference opened in Songshan Lake, Dongguan. More than a year later, Huawei’s self-developed system Hongmeng OS has been upgraded to 2.0, and has also brought HMS core 5.0 and emui 11.
The impact of the ban on Huawei is undoubtedly very huge. In August this year, Yu Chengdong, Huawei’s consumer business, once said that without the restrictions of the relevant U.S. ban, Huawei’s mobile phone shipments could surpass Samsung’s last year.
According to the report of IDC, a market research organization, in the second quarter of 2020, when the global smartphone shipment volume dropped by 16% year-on-year, Huawei surpassed Samsung (54.2 million units) with 55.8 million units, and rushed to the top position in the global smartphone shipment volume, with a market share of 20.0%.
However, with the arrival of a new round of bans, from September 15, the United States will restrict Huawei from using American technology and software to design and manufacture semiconductors abroad (outside the United States). These companies need licenses when re exporting, exporting from abroad (outside the United States) or transferring to Huawei or any of its affiliated companies on the entity list.
In short, any semiconductor company using U.S. technology can no longer sell its products and technologies to Huawei, or it will be subject to relevant sanctions from the U.S. government. After the ban was issued, TSMC, Samsung, Intel, MediaTek, Qualcomm, SMIC, Hynix and other major chip manufacturers in the world have successively said that they will not be able to continue to provide services to Huawei after September 15.
Although Huawei has begun to stock up on chips before the ban comes into effect (according to Huawei’s financial report at the end of the first quarter of 2020, Huawei’s inventory has reached 188.2 billion yuan), but it is also prepared for the worst. Yu Chengdong said: “due to the second round of sanctions, chips can not be produced, it is very difficult, and they are all in the shortage stage. It could be a very big loss for us. ”
Although some media have said that Huawei’s existing chips may meet the demand for the whole year of 2021, and the ban policy changes after the US election, once no core is available, Huawei will encounter a huge impact.
Huawei’s experience is a reflection of the embarrassing situation of China’s chip industry.
In the era of silicon-based information technology, chips are as important as coal and oil in the industrial revolution. Therefore, what is the status quo of the development of China’s chip industry is a more worthy topic to explore after the extension of Huawei’s event and the impact of a ban.
What kind of development has China’s “core” experienced? Where is it now? Where should we go tomorrow? To answer these questions, we need to go back to the beginning of the story.
Starting: catching up under the national system
In 2000, known as the father of Silicon Valley, the father of integrated circuits, and the founder of Fairchild Semiconductor Company and Intel, Robert Noyes, has passed away. According to the regulations that the Nobel Prize is only awarded to the living, Jack Kirby, 77, finally won the Nobel Prize in physics this year. By this time, it has been 42 years since the invention of integrated circuit.
In 1958, when a bipolar transistor, three resistors and a capacitor successfully formed the first integrated circuit prototype, no one knew what it would bring to human history.
Jack Kirby and the world’s first integrated circuit
In the 1960s, single crystal technology was developed by Bell Labs. At this point, the semiconductor industry has finally established its position, and its production capacity can begin. In 1964, the famous Fairchild Semiconductor invented the planar process, which solved the problem of wire connection between different components in the circuit. At that time, such technologies as etching and micro shadow appeared. At this time, silicon valley began to take shape, Intel, AMD and other companies were also established in the following years.
The planar technology developed in the 1960s can put more and more components on a single silicon wafer, from less than 10 components in 1960 to 100000 components in 1980s, and then to tens of millions of components in 1990s. At this time, Intel founder Gordon Moore put forward his industry vision: the number of transistors that can be accommodated in integrated circuits will double about every 24 months. In other words, processor performance doubles every two years.
In 1968, American radio successfully developed the first complementary metal oxide semiconductor (CMOS) integrated circuit. The invention of CMOS devices effectively implements Moore’s law. In 1971, Intel launched 1KB dynamic random access memory dram, and the world’s first microprocessor 4004, marking the emergence of large-scale integrated circuits.
Federico faggin, Ted Hoff and Stanley mazor hold Intel 4004 processor at National Inventors Hall of fame, 1996
At the beginning of semiconductor industry, the gap between China and the world’s top technology is not big.

In 1954, when the United States developed silicon alloy transistors, China’s Beijing electronic tube factory also developed silicon alloy transistors four years later (1958). In 1959, the United States invented the planar lithography technology and successfully developed the planar diffusion transistor. The Institute of semiconductors of the Chinese Academy of Sciences also developed the planar tube in 1963. At the same time, many units are also developing the planar tube.
In 1975, Wang Yangyuan (academician of the Chinese Academy of Sciences and founder of SMIC) and others designed the first batch of 1KB DRAM dynamic random access memory (RAM) of three types (silicon gate NMOS, silicon gate PMOS, aluminum gate NMOS) by the semiconductor research group of the Physics Department of Peking University. It is five years later than the c1103dram memory chip developed by Intel company of the United States, but it is four or five years earlier than that of Korea and Taiwan Year.
In the initial stage of semiconductor transistors and integrated circuits, the gap between China and the United States is only about five years. At that time, the domestic semiconductor industry mainly served the computer and military industry. With the development of logic circuit as the main product, the industrial foundation of integrated circuit and the supporting conditions of related equipment, instruments and materials were initially established. Therefore, the national system was implemented.
In 1956, China put forward the slogan of “marching toward science”. According to the development of electronic components in foreign countries, it was proposed that China should also study semiconductor science, which was listed as one of the four national emergency measures. Under the national system, China’s semiconductor industry can catch up with the United States, thanks to a group of semiconductor talents who returned to new China.
During that time, the Institute of Applied Physics of Chinese Academy of Sciences invited semiconductor experts such as Huang Kun, Wu Xijiu, Huang Chang, Lin Lanying, Wang Shouwu, Cheng Zhongzhi, etc. to teach semiconductor related theories, and opened semiconductor physics specialty in Peking University, cultivating the first batch of semiconductors professionals in China, including Wang Yangyuan, chairman of SMIC international, and Xu, chief engineer of Huajing group Ju Yan, chief engineer of the Ministry of electronic industry Yu Zhongyu, etc.
The whole country model may ensure that science and technology will not be left behind, but if the industry can not make profits through commercialization and industrialization, it is difficult to ensure long-term and healthy development.
In July 1977, Wang Shouwu, an academician of the Chinese Academy of Sciences and an expert in microelectronics, made a speech at a symposium of 30 representatives of the scientific and technological circles held in the Great Hall of the people. He said: “there are more than 600 semiconductor production plants in China, and the total amount of integrated circuits produced in one year is only one tenth of the monthly output of a large Japanese factory.” One sentence vividly summarizes the situation of China’s semiconductor industry at that time.
In 1975, Wang Shouwu (middle) and Chinese American scientists visiting the Institute of Semiconductors
In 1978, with the reform and opening up, China’s integrated circuit industry entered a period of exploration and development. China has actively introduced foreign advanced science and technology, and has built a number of key projects. In the same year, the state invested 1.3 billion yuan to support 24 enterprises to introduce 33 advanced production lines from abroad.
In October 1982, the State Council set up the “leading group on electronic computers and large scale integrated circuits” to formulate China’s chip development plan. In 1985, Hou Weigui, the former technical section chief of aerospace 691 plant, was sent to Shenzhen to establish ZTE semiconductor, the predecessor of ZTE.
At this point, China’s chip semiconductor industry began to enter the fast lane of development. At that time, it was the common pursuit of the industry to rapidly reach the world level. However, it was precisely during this period that the gap between China and the international advanced level was widened, which was not only due to internal reasons, but also closely related to various barriers formed by the division of labor in the global chip industry.
Down: the branch road of Wintel Alliance
Early computer manufacturers need to develop integrated circuits including instruction set, compatible operating system, database and other software and hardware, which requires a huge cost of capital and time.
Therefore, different enterprises choose different ways to enter the market. Enterprises established in the 1970s, such as Oracle and Microsoft, initially entered the computer market through software; Intel and AMD used hardware.
The two paths finally crossed.
With the advent of the PC era, Intel and Microsoft have formed barriers to the instruction set and software ecosystem through their powerful x86 instruction set, windows system and lawyer team, sweeping the global PC market. China’s active accession to the WTO, the semiconductor industry under the support of state funds, under the impact of countless cheap and easy-to-use market chips, the consequences can be imagined.
A large number of state-owned electronic factories have encountered great difficulties under the trend of marketization, and the second-hand production lines imported from abroad have not caught up with the trend. In order to solve this problem, the national ministries and commissions have launched three campaigns (the “531 strategy” in 1986, “908 project” in 1990 and “909 project” in 1995), but the effect is not good, and the gap between China and foreign semiconductor industry has not narrowed.
“909 project” landing in Shanghai
The ban on Huawei now also existed at that time. European and American countries restricted the export of the most advanced high-tech equipment to China through “batumis” and “wassenar agreement”. Xu Guanhua, former Minister of science and technology of China, once said that “China’s information industry lacks core and soul”. The core refers to the chip, and the soul refers to the operating system.
In 2001, academician Ni Guangnan cooperated with Fangzhou company, trying to break the operating system and chip with independent intellectual property rights. The path of ark is to bypass Microsoft and Intel, use arm architecture to design chips, and use Linux as operating system to make a fully autonomous thin client NC, replacing the “Wintel” architecture.
This product, which was technically successful at that time, was still not successful in marketization. The reason is the ecosystem behind Wintel and the huge ecological chain formed by numerous upstream and downstream hardware and software, which also involved the further division of labor in the chip semiconductor industry.
After Microsoft and Intel dominate the PC market through their “software and hardware double play”, other semiconductor manufacturers have to bypass these two mountains or simply serve them in order to survive. The most typical two companies are TSMC and arm, which is also the beginning of new companies’ innovation.

In the era of PC, with the rapid popularization of personal computers, Intel, which sets up instruction sets, designs IP and manufactures its own products, is unable to meet the growing market demand in terms of production capacity, and has to seek other OEM factories to manufacture chips for it. This is the beginning of TSMC’s growth as a leader in the industry.
In 1983, Zhang Zhongmou, a graduate of Massachusetts Institute of technology and the third person of Texas Instruments, returned to Taiwan because of his different ideas from other high-level development concepts of the company. Four years later, he founded the world’s first professional OEM company, Taiwan integrated circuit manufacturing company (TSMC). In the second year of TSMC’s establishment, Zhang Zhongmou obtained Intel’s orders for chip OEM through his personal relationship, and got Intel’s endorsement. TSMC grew rapidly, and its annual revenue growth rate exceeded 50%.
After more than 30 years of development, TSMC has become the leader in the field of wafer foundry, and even ahead of Intel, TSMC is the first to achieve 5nm chip mass production.
Also struggling to survive under the Wintel alliance is the start-up arm.
Acorn computer, the predecessor of arm, was founded in Cambridge in 1978. After seeking Intel’s x86 license, it was forced to develop arm architecture chips based on RISC reduced instruction set. Although the chip has been developed, the sales of the chip are poor, and the huge loss makes the company have to give up the direct production of the chip, but sell the IP right of the chip to other companies by means of IP core authorization. The innovation of this business model is the beginning of the era of arm mobile Internet.
Foundry and IP authorization mode were born.
The impact of the birth of these two models is undoubtedly huge. Countless enterprises that have no capital to research and produce chips themselves can enter the electronic industry by purchasing IP and making OEM, which will undoubtedly promote the healthy development of the industry. In addition, enterprises that focus on a specific field can invest in technology efficiently in its subdivision field, and promote the rapid development of the whole industry and the whole industry chain.
With the passage of time and the progress of technology, the specialization of integrated circuits has been more detailed. Systems, IP suppliers, IC design, wafer foundry, packaging, testing and other links have begun to have specialized enterprises, and fewer and fewer manufacturers implement the integrated device manufacturing (IDM) mode.
The change of production mode has also contributed to the readjustment of global industrial structure.
Catching up: from the low end to accumulate capital
Because of the highly specialized division of labor in chip production, the global chip industry is also more closely linked. The progress or stagnation of each link of technology will have a great impact on the chip industry. One of the most typical is in the process of wafer foundry, which continues to be subdivided into the production equipment end of the lithography machine.
ASML in the Netherlands occupies 80% of the lithography market. The sales of its EUV lithography machines are close to US $120 million, but semiconductor manufacturers are still willing to pay. Because EUV lithography is needed for 7Nm and above processes, when the same 7Nm process is used, the transistor density and performance will be better after using EUV lithography technology.
Lithography machine
Today, even in the equipment side, there are many professional subdivisions, such as: silicon wafer equipment, heat treatment equipment, lithography equipment (ASML), etching equipment, ion implantation equipment, film deposition equipment, polishing equipment, cleaning equipment, detection equipment.
With the globalization of the chip industry chain, the vertical integration mode has changed to “IP licensing + troubleshooting + foundry” mode, which is also accompanied by the migration of chip semiconductor industry in different parts of the world. Countries also hope to seize the opportunity of division of labor and fission in the chip semiconductor industry.
Japan introduced a lot of advanced technology from American companies based on the way of market for technology. Through national financial support and personnel training, Japan absorbed, mastered and innovated the original technology, and won the monopoly position of memory market in the 1980s. Intel had to give up DRAM business and focus on CPU business.
The rise of Taiwan’s TSMC and South Korea’s Samsung in the 1990s also benefited from the division of labor in the chip semiconductor industry. TSMC is in the process of wafer foundry, while Samsung is in IC design. Exynos developed by Samsung is very popular in the market, which is also an important factor for the rise of Samsung mobile phones. It can even be said that the success of Apple mobile phone is inseparable from this dynamic division of labor.
After 2010, domestic mobile phone manufacturers, such as Huawei, Xiaomi, vivo and oppo, have also benefited from the new trend of division of labor that has lasted for nearly 30 years. Before that, many chip semiconductor enterprises in China were established in succession, trying to seize the dividend of the times.
Source: Everbright Securities Research Institute
At the same time, many private enterprises are unable to adopt the IDM mode supported by national strategy because they do not have sufficient funds. These market-oriented enterprises rely on the domestic low labor, land and other costs to do the cheapest and lower technology threshold in the global chip industry chain, such as packaging and testing in the chip industry chain, and then gradually establish barriers in their own subdivided fields through capital accumulation and technology update.
From the perspective of the overall development path of the industry, it generally needs to go through the following stages:
The first is the labor-intensive IC sealing and testing industry;
Secondly, the technology and capital intensive IC manufacturing industry will differ by 1-2 generations of technology after transfer;
Knowledge intensive IC design is difficult to transfer and needs independent development.
At the beginning of the 21st century, the sealing and testing industry has been transferred to China, and the industry has completed the early stage of development in South Korea and Taiwan. So, what is the position of China’s chip industry in the global industry chain?
Breakthrough: opportunities under 5g and AI wave
First of all, in terms of market size, China’s semiconductor market is close to one third of that of the world.

According to WSTS data, the global semiconductor sales in 2016 were US $338.9 billion, including 107.5 billion in China, accounting for 31.7% of the global market. China is the fastest growing region in global demand. From 2010 to 2016, the compound annual growth rate of global semiconductor market was 6.3%, while that of China was 21.5%. With the further rise of 5g, consumer electronics, automotive electronics and other downstream industries, superimposed on the transfer of global semiconductor industry to the mainland, the scale of China’s semiconductor industry is expected to further grow.
Secondly, in terms of region, around the Yangtze River Delta, Pearl River Delta, Beijing, Gansu, the domestic chip industry has begun to take shape. Specifically, the situation in the Yangtze River Delta is as follows:
In the field of design, we have Howe technology, Huada semiconductor and Geke microelectronics;
In the field of manufacturing, there are SMIC, China Resources Microelectronics and Huahong group;
In the field of packaging and testing, there are ancon, shengdie semiconductor and Jiangsu Xinchao technology group;
There is also the largest integrated circuit Industrial Park in China with relatively complete industrial chain – Zhangjiang High Tech Park;
In the field of AI chips, there is also a chip company named Pingtou brother founded by Alibaba.
Shenzhen in the Pearl River Delta is a leader in chip design in China, where leading enterprises in chip field, including Hisilicon, ZTE microelectronics, SMIC in Shenzhen and Duntai technology, are gathered here. In 2018, the sales revenue of Shenzhen’s integrated circuit industry reached 89.794 billion yuan, of which the sales of design industry was 75.87 billion yuan, accounting for 85% of the total.
Beijing’s Ziguang ZHANXUN group is one of the few integrated circuit enterprises in China. In addition, the Cambrian headquarters of the artificial intelligence chip company, which has attracted much attention in recent years, is also set up in Beijing.
Gansu is a leader in packaging and testing. Gansu not only has Tianshui Huatian Electronics Group, but also has Huawei, Tencent, Neusoft, Zhongke Shuguang and other well-known information technology enterprises in Gansu, so the packaging and testing ability of Gansu Province has soared rapidly.
In recent years, the domestic semiconductor industry has maintained a double-digit growth rate. The development of manufacturing, design and packaging and testing industries is becoming more and more balanced. However, the industrial structure is still unbalanced and the proportion of manufacturing industry is too low. In the first three quarters of 2017, China’s IC design, manufacturing and packaging industry accounted for 37.7%, 26% and 35.5% respectively. However, the proportion of the world’s IC industry design, manufacturing and packaging test industry is 3:4:3. Specifically:
In terms of system, in addition to military supplies of various countries, the systems carried by smart devices such as mobile phones, computers and tablets are dominated by windows, IOS and Android. The Hongmeng system developed by Huawei is still in the 2.0 test stage.
In terms of IP design, it is too difficult to bypass x86 and arm architecture. Fortunately, risc-v is globally open-source shared. The ecosystem is still the most difficult fortress to conquer.
In terms of IC design, there are about 1698 chip design companies in China in 2018, with an estimated output value of 257.696 billion yuan, a year-on-year increase of 32.42%. Among them, Hisilicon and Ziguang group are among the top ten fablesses in the world.
In terms of wafer foundry, the largest OEM plants in mainland China are SMIC international, Huahong semiconductor and Shanghai Huali microelectronics. The 28nm process is gradually mature, and the 14nm production line is on the way. However, compared with TSMC’s 5nm process, it still needs a long time to catch up. According to semi data, it is estimated that between 2017 and 2020, there will be about 62 wafer plants put into operation in the world, of which 26 are located in China, accounting for 42% of the global total.
In terms of packaging and testing, China’s chip packaging and testing industry is developing rapidly, and the mainland’s top three sealing and testing companies, which are composed of Changdian technology, Huatian technology and Tongfu microelectronics, have been in the top 10 for a long time.
It can be seen that ecological problems are still the bottleneck restricting the development of domestic chip industry, and this can only be changed by grasping the opportunity brought by the next major technological innovation. The approaching of the era of Internet of things is this opportunity. New players are trying to seize this opportunity. For example, some media disclosed that Ali Pingtou has begun to independently develop new instruction sets for IOT.
At the same time, with the advent of 5g era and the rapid development of AI technology, it is possible for AI chips to open up the market. It is not too late for domestic chip companies to enter the new circuit in this chip field. This includes not only the Cambrian when AI started, but also Huawei, Alibaba and other giants entered the field of smart chips after accumulating massive data.
Apart from ecology, the most difficult point for China’s chip industry is still chip manufacturing.
Wafer manufacturing is a large-scale economy, with the characteristics of large investment, slow return and rapid technology update. Moreover, chip manufacturing has very high requirements for factory environmental cleanliness, pollution control level, material purity and equipment fineness. It is one of the embodiment of the most top scientific and technological level in materials. Behind it is the precipitation of basic science and comprehensive national strength, while domestic related technologies are still in use It is relatively weak, and it is very difficult to upgrade to the international advanced level in a short period of time.
The reality caused by multiple dilemmas is that although the domestic chip market is huge, more than half of the chips still need to be imported, especially in the high-end chips. The good news is that despite the challenges, there are still opportunities for the domestic chip industry to break through.
In the development history of chip industry for more than half a century, chip semiconductor has gradually become a global business with fine division of labor under the wave of globalization. No matter IBM or Intel, no one can guarantee the first position in the market while taking into account the whole industrial chain. From Intel x86, which refuses any authorization, to arm, which takes IP licensing as the main business model, and then to the emergence of the risc-v open source instruction set, the more enterprises born after the Internet, the more open and imaginative space for the future. The development history of chip industry has proved that an efficient development of scientific research industry can not do without the linkage of global industrial chain, especially in the chip industry.
At present, under a series of bans, Huawei has increased subsidies to developers from all over the world, attracting more applications under HMS. In the face of life and death, Huawei’s firm investment may be able to solve the ecological constraints faced by the domestic chip industry.

Only by fighting back and forth can we truly accomplish our work in one battle. At present, the situation in front of Huawei and even the whole Chinese chip industry is obviously difficult, and this may also become the beginning of the nirvana of Huawei and even the whole Chinese chip industry.
(statement: This article only represents the author’s point of view, not Sina’s position.)