‘Four of Five Huawei AI Chips Defective’ as US Sanctions Bite

China’s Huawei Technologies is facing significant challenges in the production of its artificial intelligence (AI) chips, with recent US sanctions cutting off the firm’s access to leading chipmaking technologies.

Huawei’s AI chip — the Ascend 910B — has been touted as China’s answer to top chipmaker Nvidia and recent US chip export bans.

But despite being manufactured by China’s biggest foundry Semiconductor Manufacturing International Corporation (SMIC), the chip’s yield rate remains a lowly 20%, according to a report by market research firm TrendForce.

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That means out of every five Ascend 910B chips that SMIC makes, four are defective.

The issue has persisted despite the chip being in production for more than half a year, Trendforce said, adding that the chip’s production was further slowed by frequent equipment failures.

Huawei and SMIC currently use older stockpiles of chipmaking equipment to produce the Ascend 910B chips as US sanctions have cut off their ability to purchase more advanced tools.

Washington has, since 2022, ramped up measures to stop semiconductor firms from shipping top chipmaking technology and advanced chips to China. AI chips and the tools to make them have been a key focus of those curbs.

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But last year, SMIC succeeded in using lesser advanced Deep Ultraviolet (DUV) lithography machines to produce new generation 7 nanometre (nm) chips. Leading chipmakers such as Taiwan’s TSMC use new-age Extreme Ultraviolet (EUV) lithography machines to produce those chips.

While Huawei and SMIC’s breakthrough was widely seen as China’s ability to out manoeuvre US chip curbs, experts warned that using lesser advanced tools would result in lower yields.

Trendforce quoted ASML — the world’s dominant maker of lithography machines — as saying that while using EUV machines to produce 7nm chips requires only nine steps, the same process require 34 steps when done through DUV tools.

More steps lead to greater costs, higher defect rates, and more frequent equipment failures, it said.

Lack of parts, maintenance expertise

SMIC was also running short of necessary equipment parts and unable to get maintenance services on its machinery due to being cut off by US export curbs, Trendforce said.

The chipmaker lacked the talent necessary to maintain, manage or repair its machinery, it added.

The report comes on the heels of recent comments by a senior Huawei executive, who admitted they had a critical shortage of equipment needed to make small, more advanced semiconductors.

“The reality is that we can’t introduce advanced manufacturing equipment due to US sanctions, and we need to find ways to effectively utilize the 7nm semiconductors,” the official said during a tech conference in China.

Those comments came even as Huawei and SMIC set up new production lines in Shanghai, reportedly to produce 5nm chips.

SMIC’s challenges would spell trouble for China’s furiously expanding AI industry — which remains cut off from cutting-edge chips due to US sanctions.

Expecting a lack of access to Nvidia, tech giants such as Baidu and Tencent placed large orders for Ascend 910B chips last year, with delivery expected this year.

Meanwhile, SMIC was looking to produce half a million Ascend 910B chips annually, but these challenges would mean those targets will not be met.

Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]