China’s Huawei, SMIC ‘to Ramp Production’ of Newest AI Chip

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.

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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.

Nvidia is currently developing a version of its “Blackwell” chip series for Chinese customers, dubbed “B20”, which would be the most advanced semiconductor the US chipmaker can sell in China. But uncertainty looms around whether it will be allowed to do so.

Meanwhile, Huawei’s 910C is capable of performing better than Nvidia’s B20 chip, an analyst at industry research firm SemiAnalysis told the Washington Post in August.

That was after Huawei had begun sending samples of the chip to internet and telecom companies. It has now also sent the chip’s samples to some technology firms and started taking orders, according to Reuters.

Even at a low yield, the ability to promise better performance that Nvidia’s best chip in China would be a huge leg up for Huawei. Commercially it will have the backing of Beijing, which is trying to make the world’s second-biggest economy self-sufficient in advanced semiconductors.

In May, Beijing set up a near $48 billion fund to boost the semiconductor sector.

Huawei and SMIC, meanwhile, have been among the biggest beneficiaries of state support.

In 2023, Huawei received over $1 billion in government grants, according to the South China Morning Post. SMIC received $360 million worth of subsidies.

More restrictions loom

SemiAnalysis also told WaPo that Huawei “could produce 1.3 million to 1.4 million 910C chips next year if it doesn’t face additional US restrictions.”

But that remains unlikely with Donald Trump’s return to the White House in January. Trump has made tough-on-China trade policies core to his economic agenda.

In the days after his election, Taiwanese chipmaker TSMC — the world’s largest contract chipmaker — notified all its Chinese AI chip customers it would stop producing their advanced processors.

That was after one of TSMC’s chips had been found in a Huawei 910B process, and the US ordered the Taiwanese chipmaker to halt shipments of advanced chips to Chinese customers.

Reuters, with additional editing and inputs from 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]