China’s Dream Of Dominating The Tech World Might Start Looking Shaky Soon

Just days after Chinese tech giant Huawei unveiled its Mate 70 series, a line of smartphones powered by an advanced chip that the country was thought incapable of producing due to stringent US-led semiconductor export restrictions, Washington moved swiftly to impose even tighter controls.

The Mate 70’s unexpected technological leap has ignited concern in the United States (US), prompting a renewed crackdown aimed at plugging the loopholes that allowed China to achieve this breakthrough.

The US Commerce Department’s Bureau of Industry and Security announced sweeping new regulations designed to stifle China’s progress in advanced semiconductor technology. These measures, disclosed on Monday (2 December), target critical components essential for military technologies, artificial intelligence (AI), and cutting-edge weaponry.

Among the most significant controls are export restrictions on 24 categories of chipmaking equipment and three vital software types required for semiconductor development.

One of the primary focuses of these measures is superfast high-bandwidth memory (HBM), an indispensable component for AI systems and other advanced computing applications. The restrictions on US-origin and foreign-made HBM are intended to stymie China’s ability to enhance its AI capabilities for military use. The regulations also revise the foreign direct product rule, enabling the US to exert control over items manufactured abroad if they incorporate American technology.

The updated rules directly aim at semiconductor manufacturing equipment destined for mainland China and Macau. They also restrict the foreign-made goods that can be supplied to entities on the US Commerce Department’s entity list, which includes organisations linked to China’s military or alleged human rights violations. Furthermore, the measures blacklist 140 Chinese organisations, ranging from semiconductor manufacturers to investment firms tied to military ambitions, although their names remain undisclosed.

The Biden administration has built upon the restrictive policies initiated under Donald Trump’s presidency. In 2019, Trump signed an executive order banning US firms from using technology from entities deemed national security risks, placing Huawei on the entity list and barring it from the US market.

While Trump’s administration launched the trade war with China, President Biden has intensified the tech rivalry, introducing stricter tariffs and export controls on semiconductors. These steps reflect Washington’s fears that American technology might inadvertently accelerate China’s military modernisation, directly threatening US national security.

Commerce Secretary Gina Raimondo described the latest restrictions as the toughest measures yet, emphasising their role in degrading China’s capacity to manufacture advanced chips essential for military modernisation.

"We can’t allow US technology, our most sophisticated, cutting-edge technology, to be used to fuel the military modernisation of our adversaries, particularly the PRC," Raimondo stated.

In addition to tech controls, Washington has urged its allies, including Japan and the Netherlands—key players in the global chip manufacturing tool industry—to adopt similar measures.

Last month, the Biden administration also announced a forthcoming ban on US investments in China’s advanced technology sectors, including semiconductors and AI, set to take effect in January.

In 2020, the company faced what appeared to be an existential crisis after the Trump administration’s sanctions cut it off from critical semiconductor supply chains. Struggling to source advanced chips, Huawei partnered with Semiconductor Manufacturing International Corporation (SMIC), a Chinese foundry far behind global leaders like Taiwan Semiconductor Manufacturing Company (TSMC) in terms of technological prowess.

SMIC adopted an unconventional approach, relying on older, less sophisticated equipment to produce more advanced chips. This strategy was slow, costly, and fraught with challenges, but it represented Huawei’s best chance for survival. The collaboration culminated in the development of the Kirin 9000S chip, a technological milestone achieved under intense scrutiny and pressure from US export restrictions.

SMIC’s achievement, however, was far from straightforward. The company operated without access to the extreme ultraviolet (EUV) lithography machines used by industry leaders, instead relying on deep ultraviolet (DUV) machines. This approach increased production complexity and waste, but SMIC overcame these hurdles with ingenuity and state subsidies. Despite initial yield rates of just 30 per cent—well below the industry standard—the Chinese government’s financial support kept the project alive.

Huawei engineers played a pivotal role, working alongside SMIC to align chip designs with manufacturing specifications. Unable to tap into American expertise due to sanctions, the companies sought assistance from engineers in Taiwan, Japan, South Korea, and Germany. Their collaborative efforts bore fruit in 2023 with the release of the Mate 60 series, powered by the Kirin 9000S chip. The phone’s performance, comparable to Qualcomm’s earlier-generation chips, marked Huawei’s triumphant return to the high-end smartphone market.

The Mate 60 became a symbol of resilience in China, capturing national pride and bolstering Huawei’s position as a technological innovator. However, its success also sent shockwaves through the United States, where analysts scrambled to understand how Huawei had managed to circumvent the restrictions. The achievement underscored the limits of US sanctions, raising questions about their effectiveness.

The Mate 70 series, launched on 26 November, represents Huawei’s latest attempt to reduce its dependence on foreign technology. Powered by HarmonyOS NEXT, the series boasts a 40 per cent performance improvement over its predecessors and signals Huawei’s continued pivot away from Google services, which were cut off in 2019.

The flagship versions of the Mate 70 feature the Kirin 9100 chipset, an upgrade to the 6nm process node from the 7nm Kirin 9000S chips used in the Mate 60 series. However, production challenges may restrict its availability to higher-end models.

While Huawei’s ingenuity has allowed it to navigate previous sanctions, the latest US measures could complicate its path forward.

The restrictions on HBM and advanced chipmaking equipment aim to choke off China’s ability to develop cutting-edge technologies, potentially stalling Huawei’s progress. Moreover, with Trump poised to return to the White House in under two months, the likelihood of a policy reversal appears slim.

Trump, despite criticising the Biden administration’s Chips and Science Act as a “bad deal,” is expected to continue—if not intensify—the restrictions on China’s tech industry.

The big question is how long Chinese tech giants like Huawei can stay in the game with all these restrictions piling up. Sure, they’ve shown grit and had plenty of state support, but without access to the latest tools and tech, it’s a tough road ahead. If they can’t catch up with the big players, China’s dream of dominating the tech world might start looking shaky.