The Chinese chipmaker at the heart of the U.S.-China tech war

Date:

SHANGHAI — In a sprawling factory in eastern Shanghai, where marshy plains have long since been converted into industrial parks, China’s most advanced chipmaker has been hard at work testing the limits of U.S. authority.

Semiconductor Manufacturing International Corp., or SMIC, is manufacturing chips with features less than one-15,000th of the thickness of a sheet of paper. The chips pack together enough computing power to create advancements such as artificial intelligence and 5G networks.

It’s a feat that has been achieved by just a few companies globally — and one that has landed SMIC in the middle of a crucial geopolitical rivalry. U.S. officials say such advanced chip technology is central not just to commercial businesses but also to military superiority. They have been fighting to keep it out of Chinese hands, by barring China from buying both the world’s most cutting-edge chips and the machinery to make them.

Whether China can advance and outrace the United States technologically now hinges on SMIC, a partly state-backed company that is the sole maker of advanced chips in the country and has become its de facto national semiconductor champion. SMIC pumps out millions of chips a month for other companies that design them, such as Huawei, the Chinese technology firm under U.S. sanctions, as well as U.S. firms such as Qualcomm.

So far, SMIC hasn’t been able to produce chips as advanced as those of rivals such as Taiwan Semiconductor Manufacturing Co. in Taiwan, or others in South Korea and the United States. But it is racing forward with a new AI chip for Huawei called the Ascend 910C, which is expected to be released this year.

Huawei’s chip is not as fast or sophisticated as the coveted processors from Nvidia, the U.S. chip giant, which the White House has banned for sale in China. SMIC can also most likely make only a small fraction of what Chinese firms want to buy, experts said.

But the chip would still be a boon for China’s AI ambitions. Nvidia’s components are the secret sauce in AI computing clusters that can train chatbots, unlock new medicines and help design hypersonic missiles. If Huawei, with SMIC’s help, can make more AI chips in the coming years, that could blunt the impact of U.S. technology restrictions — and perhaps one day cut into Nvidia’s lead.

SMIC did not respond to requests for comment. Huawei and the U.S. Department of Commerce, which oversees technology controls, declined to comment.

In an interview in June, Commerce Secretary Gina Raimondo said the United States led the world in AI, and that tech restrictions were helping to maintain that lead. “We have protected, to a large extent, our most sophisticated technology from getting to China,” she said.

Liu Pengyu, a spokesperson for the Chinese Embassy in the United States, said China opposed “politicizing and weaponizing trade, scientific and technological issues. Sanctions and repression will not deter the development of China and Chinese enterprises.”

China has invested more than $150 billion in the chip industry, including a $47 billion investment fund announced in May, helping to fuel a stunning factory expansion. SMIC alone operates more than a dozen chip manufacturing facilities, called fabs, around China, and is planning or constructing at least 10 more, according to Paul Triolo, a tech expert at Albright Stonebridge who tracks the industry.


At the epicenter of the escalating tech war between the United States and China sits one pivotal player: the Chinese chipmaker, Semiconductor Manufacturing International Corporation (SMIC). SMIC, one of the biggest players in chipmaking globally, is strategically poised in a sector that has become central to the geopolitical struggles and economic competition between the two superpowers.

This article aims to delve into SMIC’s journey, importance, and the implications of its struggles with global geopolitics on the chip-making industry.

Birth of SMIC

Founded in 2000, SMIC gains its fame as China’s largest, most advanced semiconductor manufacturer. Striving to catch up with the industry’s giants, including Taiwan’s TSMC and South Korea’s Samsung, SMIC has made significant progress over the years. The company has become a symbol of China’s ambition to lessen its reliance on foreign chip technology and establish itself as a major competitor in the global chip market.

SMIC in the Ongoing Tech War

The critical role of SMIC in China’s technology ambitions has put the company in the crosshairs of the ongoing U.S.-China tech war. As part of a broader effort to curb China’s advances in key tech sectors, the U.S. imposed export restrictions on SMIC in December 2020. The U.S government believes that SMIC poses an “unacceptable risk” of its products being diverted to “military end use” in China.

The U.S. move has essentially cut SMIC off from vital American equipment and software, a move that accentuates how the global supply chain’s interconnectedness can be weaponized in geopolitical tussles.

Impact on China’s Semiconductor Aspirations

The implications for China—and SMIC—are vast. Beijing has poured billions into developing in-house chip technologies to fulfill its “Made in China 2025” ambitions. This national strategic plan aims to advance Chinese domestic semiconductors to compete and eventually surpass international counterparts. Semiconductor technology is highly crucial to China’s long-term ambition to morph into a hi-tech economy and is a central pillar of fields such as AI, 5G networks, robotics, and electric vehicles.

SMIC, as the flagship of China’s semiconductor industry, was seen as instrumental in achieving these goals. However, the U.S. sanctions have forced China—once again—to reassess its technological dependencies.

Implications for the Global Chip Industry

The fallout from the U.S.-China tech war and the targeting of SMIC also prompts a rethink within the broader global chip industry. It underlines how geopolitics can unsettle complex, globalized supply chains and the strategic importance of semiconductors.

Moreover, it could fuel a fragmenting tech world, where nations strive towards technology self-reliance, a phenomenon often referred to as ‘techno-nationalism.’ In this context, countries will likely invest heavily in nurturing their own tech sectors to pre-empt their key industries from being victimized by geopolitical rivalries.

In Conclusion

SMIC is more than just a chipmaker; it’s a pawn in an escalating global game where technology—specifically chip technology—stands at the forefront. As the emblem of China’s technological pursuits, SMIC will continue to navigate cautiously against the backdrop of geopolitical tensions and economic rivalries. The U.S.-China tech war serves as a wake-up call regarding the strategic importance of chips and the risks inherent in a globalized supply chain dependent on a few key players. This disruption in the global chip industry calls for a re-evaluation of current dependencies and may accelerate the shift towards a more fragmented, self-reliant tech universe.


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The Chinese chipmaker at the heart of the U.S.-China tech war

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