The Chinese technology company Huawei Technologies is planning a "dedicated chip plant" in Shanghai as a way to circumvent U.S. export restrictions, according to a report in the Financial Times over the weekend.
Two persons briefed on the project told the London paper that the chip plant would be run by Huawei partner Shanghai IC R&D Center.
Huawei has no history of making chips.
"In theory, Huawei should be able to manufacture chips without the use of U.S. equipment," said TheStreet's tech columnist, Eric Jhonsa on Sunday. "But making chips using cutting-edge manufacturing processes is a completely different matter."
Building chips at the level of producers like Taiwan Semiconductor Manufacturing Co. (TSM) - Get Taiwan Semiconductor Manufacturing Co. Ltd. Report and Samsung would be a challenge, suggested Jhonsa.
According to the Financial Times report, the new Shanghai plant would start with making "low-end" 45nm chips that's are similar in technology from around 2005. It would then ramp up to more modern, so-called 28nm chips. By late 2022, it hopes to produce 20nm ones, according to the report.
But 28nm or even 20nm chips would be a "far cry" from the 5nm ones that TSMC and Samsung are now ramping production for, said Jhonsa. "And TSMC and Samsung, which supply many of Huawei's competitors, won't be standing still in the coming years, either. Nor will Intel (INTC) - Get Intel Corporation Report, which recently entered the 5G base station processor market."
The U.S. government in August tightened the screws on export and trade rules on chip technology companies, with a policy that went into effect in September that helped prevent the sale of semiconductor supplies to Huawei, even by non-U.S.-based companies that do business with American ones.
The Commerce Department rules expanded those set in May.
"This amendment further restricts Huawei from obtaining foreign made chips developed or produced from U.S. software or technology to the same degree as comparable U.S. chips," wrote the Commerce Department on Aug. 17.
Despite U.S. sanctions on the company it deems a threat, Huawei made about $100.3 billion (CNY671.3 billion) in revenue in the first three quarters of the year -- up 9.9% over the same period last year -- according to Huawei's financial reporting out Oct. 23.
"As the world grapples with Covid-19, Huawei's global supply chain is being put under intense pressure and its production and operations face significant challenges," said Huawei at the time. "Moving forward, Huawei will leverage its strengths in ICT technologies such as AI, cloud, 5G, and computing to provide scenario-based solutions, develop industry applications, and unleash the value of 5G networks along with its partners. Its stated goal is to help enterprises grow their business and help governments boost domestic industry, benefit constituents, and improve overall governance."
The Chinese government reportedly said last month it wants to focus on building its own chips over the next several years to lessen dependency on those made in the U.S. and elsewhere.
Huawei could not be immediately reached on Sunday evening.