Huawei is working on plans to set up a private chip plant in Shanghai that will not use US technology, enabling it to secure supplies for its communications infrastructure business despite US sanctions.
According to the Financial Times, the plant is operated by a Shanghai municipal government-backed chip research company called the Shanghai Center for Research and Development (ICRD).
The project is helping Huawei, which has no experience making chips, to chart a path to long-term survival.
Industry experts said the planned domestic facility would be a potential new source of semiconductors after stocks of Huawei’s imported chips have built up since last year.
The manufacturing plant first tests low-quality 45nm chips, a world-leading chip technology that has been in use for 15 years.
Huawei wants to manufacture 28-nanometer chips by the end of next year, and such a plan allows Huawei to make smart TVs and other IoT devices.
Huawei then aims to produce 20-nanometer chips by late 2022, so that they can be used to make most communications equipment for 5G networks and allow this commercial activity to continue even with US sanctions.
The planned new production line for smartphones will not help, because the chips needed for smartphones have to be produced via more advanced technology nodes.
The chips that Huawei needs to create mobile base stations are made using 14nm technology, but 28nm technology can be used.
Huawei can compensate for the software and system side shortcomings, and Chinese manufacturers can afford higher costs and operational shortcomings than their overseas competitors.
The project could spur China’s ambitions to shed its dependence on foreign chip technology, particularly from the United States, which wants to slow down China’s development as a technological powerhouse.
Huawei is investing in the domestic semiconductor sector, especially among smaller operators.
“We have strong chip design capabilities,” the company said in September, and are very pleased to help the trustworthy supply chain develop its chip manufacturing capabilities, equipment and materials.
Huawei plans to equip its domestic production exclusively with Chinese-made machines, but analysts warn that such a goal is elusive for several years.
It is likely that such a facility will be operated with a range of equipment from various Chinese suppliers, such as: (AMEC) and (Naura), in addition to some used foreign tools that they can find in the market.
It would be less efficient and more expensive to manufacture chips in such an environment, but Huawei can afford that because the amount of semiconductors needed for base stations is much less than the amount required for products such as smartphones.