By Takashi Kawakami and Hideaki Tatsumoto
China’s Huawei is searching for a way to bypass the U.S.’s reinforced export controls. Because the restrictions will make it difficult for Huawei to conduct direct transactions with Taiwan Semiconductor Manufacturing Company (TSMC), its main consigned manufacturer, Huawei has started deliberations on procuring TSMC-manufactured semiconductors through Taiwanese semiconductor developer MediaTek. Chinese manufacturers searching for a loophole in the controls have approached Japanese companies. The U.S. might further tighten its controls in the future.
Huawei faces the issue of how to respond to reinforced export controls announced by the U.S. Department of Commerce on May 15. The company might bypass the new controls by procuring semiconductors through companies such as MediaTek, a “fabless” chipmaker that doesn’t operate its own factories.
Huawei has pursued discussions with UNISOC, a Chinese company, on cooperation in the semiconductor business. It is possible that Huawei will increase its semiconductor procurement from UNISOC.
Chinese companies have turned to Japanese semiconductor manufacturers as well. An executive at a mid-ranking device company said that a Chinese company approached them about manufacturing a substitute product for an American-made device.
An issue in cutting-edge semiconductor production for Chinese companies is the lithography device used in the exposure phase of production. Only ASML, a Dutch manufacturer, produces lithography devices with the extreme ultraviolet (EUV) technology that is indispensable for making cutting-edge products.
The Dutch government has disallowed exports of such devices, an action thought to be in line with the U.S. government’s intent. Canon and Nikon produce lithography devices that do not use EUV technology. An analyst comments that “it’s difficult find substitutes for EUV devices since the field is dominated by ASML.” Chinese companies lack core technology for lithography devices. It would not be surprising if Chinese companies moved to join hands with Canon or Nikon.
Sony, a producer of semiconductor image sensors, and major semiconductor manufacturer Kioxia (formerly Toshiba Memory) are not seen to be covered by the new controls, and they will be able to continue doing business with Huawei. A Kioxia insider expressed concern about the drop in demand for memory if Huawei’s smartphone shipments decrease. (Abridged)