China’s SMIC Benefits From AI Chip Boom In Spite Of Sanctions

The chief executive of China’s biggest domestic chip manufacturer, SMIC, said the firm is benefiting from the AI boom in spite of US-led restrictions that prevent it from manufacturing advanced semiconductors.

While the restrictions mean SMIC doesn’t have the technology to produce advanced AI chips, it has seen revenues rise from more mature chips needed for AI infrastructure, said SMIC co-chief executive Zhao Haijun during a call with analysts.

“We can’t produce competitive products such as GPUs due to caps on manufacturing nodes, but we can produce other AI-related products such as analogue and power-supply chips used for AI products,” he said.

Graphics processing units, or GPUs, originally developed for video acceleration tasks have become a hot commodity for their ability to carry out processor-intensive AI chores such as training and inference.

AI gains

Zhao said auxiliary chips for AI products have become a growing business segment for SMIC.

“AI is a blessing for semiconductor manufacturing. It can bring us business growth in many years ahead,” Zhao said.

His remarks came after SMIC reported record revenue in the third quarter ended September on strong demand for legacy chips such as those used in cars and electric vehicles (EVs).

Zhao projected the global chipmaking industry would grow 10 percent next year on strong demand for AI products, without which he said the growth rate would be closer to 4 percent.

SMIC’s quarterly revenue surpassed $2 billion (£1.55bn) for the first time during the quarter.

The company added monthly capacity to the tune of 21,000 12-inch wafers while expanding its domestic client base.

The firm expects full-year 2024 revenues to reach $8bn, or a 27 percent year-on-year increase.

SMIC’s work with domestic companies has not been lost on US regulators and lawmakers that have been trying to ensure mainland China does not develop advanced technologies such as cutting-edge chips or advanced AI.

‘Comprehensive audit’

Michael McCaul, chair of the US House Foreign Affairs Committee, said in a letter last week that the Commerce Department’s Bureau of Industry and Security (BIS) has not been doing enough to police SMIC and its work with Huawei, both of which are under direct US sanctions as well as those affecting Chinese tech companies overall.

“There is growing evidence that SMIC is violating US export control laws,” McCaul wrote.

He said if China is not willing to immediately agree to a “comprehensive audit of all SMIC facilities and its books” then “BIS should pause all existing licences for SMIC”.

He said SMIC’s development of an advanced chip for Huawei’s Mate 60 smartphone last year and its expected production of more than one million AI processors for Huawei were a “smoking gun” for violations and could help China surpass the US in AI.

SMIC is believed to have adapted older chip manufacturing technologies to produced advanced chips for Huawei, likely meaning a low yield rate that makes the chips highly expensive to produce.