Huawei is working on plans for a special chip factory in Shanghai that will not use American technology to ensure that its core business is supplied with telecommunications infrastructures despite US sanctions.
Two people briefed on the project said the facility is operated by a partner, Shanghai IC R&D Center, a chip research company supported by the Shanghai city government.
Industry experts said the project could help Huawei, which has no experience making chips, find a way to long-term survival.
The US export controls imposed in May and tightened in August use the dominance of American companies in certain chip manufacturing devices and chip design software to block Huawei's semiconductor supply.
If it succeeds, it can become a bridge to a sustainable future for your infrastructure business
Industry experts said the proposed local facility is a potential new source of semiconductors after the inventories of imported chips that Huawei has amassed since last year accumulated.
The manufacturing facility will first experiment with making low-end 45nm chips, a technology that led the world in chip manufacturing 15 years ago.
Huawei plans to produce more advanced 28nm chips by the end of next year, according to chip industry engineers and executives familiar with the project. Such a plan would allow Huawei to make smart TVs and other devices for the Internet of Things.
Huawei then intends to produce 20nm chips by the end of 2022, which can be used to manufacture most of its 5G telecommunications devices, so that business can continue even with the US sanctions.
"The planned new production line will not help the smartphone business, as chipsets that are needed for smartphones must be manufactured at nodes with more advanced technology," said a manager of the semiconductor industry of the plans.
"But if it succeeds, it can be a bridge to a sustainable future for their infrastructure business, combined with the inventory they have built, which should take about two years," he said.
"They may be able to do this in two years," said Mark Li, a semiconductor analyst with Bernstein in Hong Kong.
He added that the chips Huawei needed to make base stations for cellular networks would ideally be made on 14nm or more advanced process technology, but 28nm could be used.
"Huawei can compensate for the deficiencies on the software and system side," he said. Chinese manufacturers could tolerate higher costs and operational inefficiencies than their offshore competitors.
The project, first reported on by Chinese newspaper Caixin last month, could also fuel China's ambitions to shake off its reliance on foreign chip technology, particularly the US, which aims to slow China's development as a tech power.
Huawei has already invested in the domestic semiconductor sector, especially with smaller operators, said a chip industry manager.
“Huawei has strong chip design skills and we are thrilled to be able to help a trusted supply chain develop their chip manufacturing, equipment and materials capabilities. Helping them helps ourselves, ”rotating chairman Guo Ping told journalists in September.
According to chip engineers and industry executives, Huawei plans to eventually equip its domestic production with only Chinese-made machines. However, analysts warn that such a goal is several years away.
"Such a facility would most likely be powered by a combination of equipment from various Chinese suppliers such as AMEC and Naura, as well as some used foreign tools that they can find in the market," Li said.
He added that making chips in such an environment would be less efficient and more costly. Huawei was able to afford this, however, because the volume of semiconductors required for base stations was much less than for a mass-produced product like smartphones.
Huawei and ICRD declined to comment on the plans for the production facility.
"You won't get any information from us here, we can't give you anything," said Huang Yin, an ICRD spokeswoman. "That's pretty sensitive."
A major shareholder in ICRD is the state-owned Huahong Group, which also controls contract chipmakers Huahong Grace and HLMC.