Huawei ‘Faces Production Bottleneck’ Amidst AI, 5G Chip Success

Beijing China Henry Chen Unsplash

Huawei prioritising production of AI chips as it sees twin success of 5G smartphones and Nvidia alternatives, in spite of US sanctions

Huawei is reportedly facing a production bottleneck amidst the success of both its Mate 60 Pro 5G handset and  its Ascend AI chips, underscoring the company’s success in developing technologies domestically that have been targeted by US trade sanctions.

The company was added to the US Entity List trade blacklist in 2019, preventing it from buying advanced 5G-capable chips, but last year introduced the 5G-capable Mate 60 Pro using Kirin chips apparently manufactured domestically by China’s Semiconductor International Manufacturing Corp (SMIC).

Meanwhile, two rounds of US sanctions in 2022 and 2023 have barred Chinese companies from buying higher-end AI accelerator chips from firms such as market leader Nvidia.

Huawei’s Ascend 910B AI chip is widely considered the best Nvidia-alternative AI accelerator available for purchase in China.


Low yields

As demand for both the Kirin-powered Mate 60 Pro and the Ascend 910B has soared, Huawei has prioritised production of Ascend chips, leading to manufacturing delays for the smartphone, Reuters reported.

A government drive to boost China’s computing power, announced last October, has helped spur demand for Ascend chips, the report said.

The news agency said a further challenge is that both the Ascend and Kirin chips are hampered by low yield rates, the number of usable chips per wafer, adding further production challenges.

The yield issues are likely to be a side-effect of modifying deep ultraviolet (DUV) lithography machines to manufacture more advanced chips, rather than the top-end extreme ultraviolet (EUV) systems that are banned from sale to China.

Top China sales spot

The Mate 60 Pro has been consistently sold out since it launched last autumn, with buyers citing month-long wait times for pre-orders.

Nevertheless the handset’s sales were a major driver of Huawei’s return to the No. 1 sales spot in China for the first two weeks of 2024, according to Counterpoint, the first time it has been China’s top seller since the end of 2020.

Huawei’s Ascend-equipped MDC 810 computing unit, which powers advanced driver assistance systems, has also been affected by the bottleneck, causing Chinese automakers to delay delivery of flagship models, Reuters said.

Nina Xiang, managing director at TH Capital, said in a Friday opinion piece for Nikkei that Huawei’s success at rebuilding its business in areas such as smartphones, AI chips and even electric automobiles should be a “moment of reflection” for US officials to “recognise that further sanctions will have only diminishing returns”.

‘Moment of reflection’

“This success holds profound significance beyond Huawei, as it suggests that Chinese companies are finding ways to start competitively producing advanced semiconductors at scale despite US attempts to restrict the industry’s development,” she wrote.

“A more effective approach would involve reemphasising increased investment in research to uphold American technological leadership and foster innovation,” she wrote. “This tack would be not only more likely to succeed but also help to regain the respect of other nations.”