Report: How Huawei Is Getting Into Semiconductor Manufacturing

Huawei, the Chinese technology giant, is making significant strides in combating US sanctions by establishing a massive research and development (R&D) facility in Shanghai, focused on semiconductor manufacturing equipment, reports Nikkei. The facility aims to develop lithography machines, crucial for producing the most advanced chips, as the company faces challenges due to US trade restrictions.

The US sanctions have not only disrupted the supply chain, preventing chip manufacturers such as TSMC and Intel from supplying Chinese companies, but also limit companies like ASML, Nikon, and Canon, which produce the machines necessary for semiconductor manufacturing. In response, Huawei is offering competitive salary packages, double the industry standard, to attract talent from companies such as Applied Materials, Lam Research, ASML, KLA, TSMC, Intel, and Micron.

The job market in China has been impacted by the US trade sanctions, with fewer opportunities available, particularly for Chinese citizens seeking employment with foreign chip companies in the country. This situation has created an opening for Huawei and other local companies to attract talent. However, the working culture at Huawei is known to be challenging, with one Chinese chip engineer stating, "Working with them is brutal. It's not 996 -- meaning working from 9 a.m. to 9 p.m., six days a week. ... It will literally be 007 -- from midnight to midnight, seven days a week. No days off at all."

The US sanctions have also prompted many Chinese chipmakers to seek domestic alternatives. Naura, a leading Chinese supplier of chip manufacturing equipment, has seen its revenue quadruple since 2018, with another record year in 2023. Huawei, too, has ramped up its local capabilities since the US sanctions crippled its smartphone business outside of China in 2019. In 2023, the company responded with phones that were competitive, leveraging technology that bypassed US sanctions. Huawei’s phones are now outselling the iPhone in China making life hard for Apple in its biggest market.

The Shanghai R&D centre, which is the new headquarters of HiSilicon Technologies, Huawei's chip design unit, covers an area equivalent to 224 football fields and is twice the size of the company's Ox Horn campus in Dongguan. The facility will accommodate 35,000 high-tech workers and feature trains for commuting between buildings on the campus. Huawei has been investing heavily in R&D, with expenditure reaching 23.4% of its total revenue.

The facility's primary purpose is not only to augment chip design capabilities but also to enable Huawei to venture into chip manufacturing with local partners. The company has been actively utilising the local Chinese supply chain, sourcing components from Chinese companies such as BOE Technologies for displays and OmniVision for camera sensors, instead of relying on Samsung or Sony.

Brady Wang, an analyst at CounterPoint Research, notes, "They've invested more in HiSilicon and introduced chips for phones and servers. They will strive to localise a greater portion of their semiconductor supply chain. However, realising these efforts, particularly those related to chip manufacturing and equipment, will be a time-intensive undertaking."