Chinese chipmakers are racing to rival Nvidia on AI chips as increasing export restrictions by US – and its allies – slow the growth of China's tech industry
www.asiafinancial.com, Nov. 21, 2024 –
Chinese technology giant Huawei and chipmaker Semiconductor Manufacturing International Corp (SMIC) are aiming to begin mass-production of China's most advanced homegrown artificial intelligence chip, starting next year, according to Reuters.
Huawei is racing to rival US chipmaker Nvidia with its AI chips at a time when increasing export restrictions by Washington – and its allies – are slowing the growth of China's tech industry.
As part of that effort, Huawei plans to start mass producing the Ascend 910C, its newest AI chip offering in China, in the first quarter of 2025, Reuters said, citing sources familiar with the matter.
SMIC, China's largest contract chipmaker, will make the 910C on its N+2 process, it added.
Huawei is aiming to ramp up production even as the yield – the proportion of chips that come off the manufacturing line fully functional – of its advanced AI semiconductors remains far below industry standards.
Advanced chips need yields of more than 70% to be commercially viable – lower yields mean greater costs and higher defect rates.
But SMIC is currently producing the 910C on older, stockpiled chipmaking equipment, which has limited the chip's yield to around 20%, Reuters said, citing a source.
Even Huawei's current most advanced processor, the SMIC-made 910B, has a yield of only around 50%, forcing Huawei to slash production targets and delay filling orders for that chip, the sources said.
US restrictions slowing production
Both Huawei and SMIC are US-sanctioned firms, and their access to chip tech has been restricted further by Washington's tightening export control rules.
Chinese chipmakers have remained cut-off from the most advanced chipmaking systems – extreme ultraviolet lithography (EUV) technology – since 2020. That was after the US barred Dutch manufacturer ASML – a firm with a near-monopoly in the production of EUV systems – from selling those machines to China.
Starting this year, ASML has also been restricted from selling its most advanced versions of second-tier deep ultraviolet lithography (DUV) machines to China. Some Chinese fabs are also restricted from buying older ASML DUV models.
The restrictions have hampered Huawei's ability to improve the yield of its advanced AI chips. And low yields mean the firm will continue to struggle to make enough chips to meet wider demand in China.
"Huawei knows there is no short-term solution, given the lack of EUVs, so it will give priority to strategic government and corporate orders," a source told Reuters.
It remains to be seen how many of those orders Huawei will manage to fill, however.
TikTok's Chinese parent, ByteDance, for instance, ordered more than 100,000 Ascend 910B chips this year. But its had received fewer than 30,000 as of July, a pace too slow meet the company's needs.
Other Chinese technology companies that have ordered from Huawei have complained of similar problems, sources told Reuters.
Challenge for Nvidia
Still, Huawei and SMIC's ability to mass produce the 910C in any capacity will prove to be a challenge for Nvidia.
The US chipmaker – currently the most valuable company in the world – commanded a roughly 90% share of China's AI chip market before US restrictions in 2022 meant it could no longer sell its most advanced chips in the country.
By the end of 2023, China accounted for around 17% of Nvidia's revenue, sliding from 26% two years earlier.