US sanctions freeze Huawei's Ascend AI chips on older 7nm process node that's eight years behind TSMC, stalling progress until at least 2026

Huawei's Ascend AI chips recently saw a third iteration - theAscend 910C- fabbed using an aging 7nm node from SMIC. Manufacturing wafers at sub-7nm levels requires the incorporation of EUV technology from companies like ASML. Recent sanctions have barred China and its respective chipmakers from securing EUV machines. Thus, domestic players have to fall back to local, sub-par equipment and resort to techniques such asquadruple patterning- which is resource-intensive and prone to alignment issues, resulting in poor yields.

The report suggests that a few undisclosed individuals close to the matter revealed that in light of these sanctions, Huawei's flagship Ascend chips will be limited to 7nm technology until 2026 - whileTSMCis gearing up to debut its 2nm-class N2 node next year. This also affects Huawei's Mate lineup of phones - now powered by its in-house Kirin chips, which compete against Qualcomm and MediaTek. It is plausible to infer that we might not see a 5nm Kirin SoC, at least in the near future.

Rubbing salt in the wound, SMIC—China's homegrown rival to TSMC—is allegedly unable to meet rising demands and maintain a steady supply of its existing 7nm-class wafers. This casts a shadow over China's ventures into the semiconductor world, which are fueled by massivegovernment-backedincentives. However, you'd be naive to think that China's the only country with high aspirations since Japan is prepping to ink a massive$65 billionplan to revive its chip industry.

Huawei has beenpoaching TSMC employees- offering nearly 3x higher salaries to secure their expertise. Last month, TSMC revealed that Huawei was using aproxyto bypass US-led export restrictions for the Ascend 910B AI chip. China must overcome the EUV barrier if it wishes to keep up with the rest of the world, as its chip designers like Huawei depend on local manufacturers like SMIC.