Urgently placed a 5 billion order with TSMC, Huawei “races” against time

After the escalation of the US restrictions and bans, the industry is quite concerned about Huawei’s follow-up actions.

On May 18, according to Taiwanese media reports, Huawei has placed an additional batch of emergency orders with TSMC. The order value is about 700 million US dollars (about 5 billion yuan). The order products include 5nm/7nm process, which makes TSMC related production capacity full.

Huawei in a race against time?

At this critical point in time, the news that Huawei has urgently increased orders from TSMC is mainly due to the recent disputes between the United States and Huawei. The following incidents have become the “fuse”:

1. On May 14, local time, Trump announced on Wednesday that he would extend by one year the executive order signed in May 2019, which declared a national emergency and banned US companies from using telecommunications made by companies that pose a national security risk. equipment. It means that Huawei, ZTE and other companies will continue to stay on the US “entity list” list;

2. On May 15, Huawei’s temporary license in the United States was extended for another 90 days, and it was declared that it was the last extension;

3. On May 16, the U.S. government announced that it is ready to prevent global chip manufacturers from exporting semiconductor components to Huawei. Companies around the world, as long as they use a certain percentage of U.S. equipment and technologies to help Huawei produce chips, must obtain approval from the U.S. government. approve. They are amending an export rule to “strategically target Huawei-purchased semiconductor components that directly use U.S. technology and software,” with the intent of “stuck in the neck” of Huawei.

In this regard, the spokesperson of the Ministry of Commerce said that China has noticed the new export control regulations issued by the United States against Huawei. China firmly opposes this. The U.S. uses its national power and abuses export control and other measures under the pretext of so-called national security to continue to suppress and contain specific companies in other countries. This is a breach of market principles and fair competition, and a disregard of the basic rules of international trade and economics. A serious threat to the security of the industrial chain and supply chain. This harms the interests of Chinese companies, US companies, and other countries’ companies. China urges the US to immediately stop its wrong practice and create conditions for normal trade and cooperation between enterprises. China will take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.

The incidents related to Huawei’s restrictions for three consecutive days have quickly fermented, causing a sensation in the entire chip industry, quickly becoming the focus of attention, and once again casting a shadow on Sino-US trade relations.

For Huawei, the first of the three relevant restriction orders may take effect/expire the soonest. The 90-day license extension means that Huawei can still be allowed to purchase some key components involving US technology before August 13. The three-month period is neither long nor short, but it is enough for Huawei to do well. Partial stock preparation.

Secondly, in terms of chips with two different processes, 5nm/7nm, 5nm is mainly for the launch of the next-generation Kirin mobile SoC, while 7nm is for the core chips of the most popular Huawei 5G mobile phone series.

The uniqueness of these two chips is that the 5nm process is limited by EUV lithography machines, and currently only TSMC and Samsung can do it; while the 7nm chips have brought huge revenue to TSMC during Q1 2020, accounting for its total wafer revenue. 35%.

Although the storm of the US ban came suddenly, it also left Huawei and TSMC with some time to prepare. Data shows that Huawei contributed 36.1 billion yuan in revenue to TSMC in 2019, accounting for 14% of TSMC’s overall revenue. , become TSMC’s second largest customer after Apple. Once Huawei loses, TSMC’s loss of sales is extremely huge.

When TSMC held an online performance briefing, TSMC Chairman Liu Deyin also said that he hoped the United States would not have such restrictions, because any new restrictions would cause harm to the US semiconductor industry. If you are prepared for it to happen, the negative impact will be minimized.

The second phase of the big fund plans to increase capital in SMIC. Can domestic supply replace external demand?

Although according to Trump’s usual practice, it is hard to say whether the ban on Huawei is a false shot or a real stick, but once the ban comes true, TSMC will inevitably have to cooperate with Huawei due to technical limitations. Disconnect. Therefore, Huawei has to choose more partners besides TSMC.

Due to the process and foundry capabilities of high-end chips, the only wafer foundry in the world that can compete with TSMC is Samsung.

But the biggest problem is that Huawei’s most-needed 5nm/7nm chips, like Samsung, are intended to be used in its own most advanced 5G products. Under the same competition, it is difficult for Samsung to become Huawei’s Kirin chip supplier. Therefore, SMIC, which is currently the most popular in China, is the most promising foundry that may replace TSMC to supply Huawei.

In the short term, SMIC can meet 95% of the domestic 14nm process market demand, but further development is needed on 7nm and the more advanced 5nm process.

Not long ago, SMIC announced that multiple parties, including the second phase of the National Integrated Circuit Fund, planned to conduct a new round of capital increase and share expansion for SMIC South, which is indirectly controlled by the company, of which the second phase of the National Integrated Circuit Fund promised to inject 1.5 billion US dollars. . After the new capital injection is completed, the registered capital of SMIC South will increase from US$3.5 billion to US$6.5 billion.

According to SMIC, the market demand for advanced processes continues to increase rapidly. SMIC will accelerate the development and production of advanced processes in the future. It plans to increase the production capacity from 6,000 wafers per month to 35,000 wafers to meet the needs of future integrated circuit wafers. OEM production needs.

Therefore, in the long run, after this incident, Huawei’s “de-Americanization” process will continue to accelerate, and in chip foundry, cooperation with domestic semiconductor foundry leaders such as SMIC will also be more in-depth.

For domestic semiconductor chip manufacturers, this wave of operations in the United States is both a challenge and an opportunity. The severe environment will force out a stronger supply chain of Huawei and domestic semiconductors, and localization replacement is about to usher in the best era.