Background and Motivation
In response to export restrictions and tariffs imposed by the U.S., Chinese tech giant Huawei has embarked on a mission to develop a domestic semiconductor supply chain. These restrictions, justified by the U.S. government as a national security issue, have targeted advanced graphics processors, microprocessors, semiconductor manufacturing equipment, and more, creating uncertainty in the Chinese electronics market.
Huawei's Investment Strategy
To mitigate the impact of these sanctions, Huawei has invested in over 60 Chinese companies across various segments of the semiconductor industry through Hubble, its wholly-owned investment arm established in 2019. According to a report by Nikkei, these investments span chip design, semiconductor materials, manufacturing, and test equipment.
Key Investments
Notable companies backed by Huawei include Suzhou Carbon Semiconductor Technology, which specializes in carbon nanotube-based wafers; Huahai Chengke New Material, a vendor of packaging materials; and SiCarrier, a semiconductor equipment firm.
In-House Production Capabilities
Huawei is also developing its own technological capabilities, constructing an advanced chip production line in Shenzhen to manufacture 7 nm smartphone and AI processors. This marks Huawei's first foray into producing high-end chips, designed by its subsidiary HiSilicon and manufactured by Chinese foundry Semiconductor Manufacturing International Corp (SMIC).
SMIC's Expansion
Similarly, SMIC, another target of U.S. export restrictions, is looking to expand its semiconductor manufacturing capabilities. In February, the company acquired land adjacent to Semiconductor Manufacturing Beijing Corp., backed by SMIC and a Chinese investment fund, likely for the production of 12-inch semiconductor wafers and packaging.
Market Trends and Expectations
Market research firm TrendForce anticipates that Chinese foundries' capital expenditures will exceed market expectations, driven by the increasing demand for AI inference models fueled by DeepSeek and a shift in orders to Chinese foundries following TSMC's supply restrictions in China. This trend could potentially lead to further expansion in the Chinese semiconductor industry.