Friday, December 29, 2023

Chips: "U.S. wants to contain China's chip industry. This startup shows it won't be easy"

First up, some news from Bloomberg about a company that was flat on its back due to sanctions.  December 28:

Huawei Sales Near $100 Billion in Year of China's Surprise Breakthroughs

  • The Chinese national champion’s sales bounced back this year
  • Huawei made its mark with chip advances in a turbulent 2023

Huawei Technologies Co.’s revenue surged 9% in 2023, capping a dramatic year for a Chinese technology powerhouse that challenged Apple Inc. and US sanctions with a surprise breakthrough in chip technology.

Sales jumped to more than 700 billion yuan ($98.7 billion), their fastest pace of growth in years thanks to a resurgent smartphone business and robust 5G equipment sales. On a quarterly basis, revenue climbed 27% to at least 243.4 billion yuan, based on Bloomberg’s calculations off the annual figure. That’s a sharp acceleration from the third quarter’s slight rise.

Huawei made a splash in 2023 after releasing a smartphone with a sophisticated made-in-China 7-nanometer Kirin processor, celebrated across the country over US restrictions intended to hobble the country’s tech industry. The revelation ignited debate in Washington over whether those curbs had failed, and what more needed to be done.

Huawei, written off as a top smartphone player after the US cut it off from overseas suppliers in 2019, is mounting a comeback. The Shenzhen-based conglomerate has emerged as a symbol of China’s resolve to thwart its geopolitical rival’s curbs. But Huawei itself warned of the dangers Washington and a volatile global economy will pose in 2024...


And from Reuters via the headline story, December 29:

Last year, a veteran Silicon Valley software executive took the helm of a startup in his native China, company records show. The startup told potential investors it would sell microchip design software that is mostly available from just a handful of large Western companies.

The coveted and highly specialized software tool, known by its initials of OPC, is used in the design of many microchips and is crucial to the design of advanced chips.

The production of advanced chips is one of the most contentious technological struggles now dividing the United States and China as they vie for economic and military supremacy. Washington is trying to curb China's access to sensitive microchip design tools.

The strategy behind the startup, dubbed SEIDA, shows why that containment effort is so challenging.

Before becoming chief executive of SEIDA, Liguo "Recoo" Zhang had lived in the United States long enough to secure permanent residency and purchase a Silicon Valley home, according to people familiar with his career and public records reviewed by Reuters.

He was employed by Siemens EDA, a U.S. unit of German industrial giant Siemens AG (OTC:SIEGY) that dominates the market in China for the very technology SEIDA told investors it planned to sell there. At least three other Chinese-born colleagues from Siemens EDA joined Zhang at SEIDA.

In a 2022 business-plan presentation prepared for investors, SEIDA called OPC "indispensable technology" and said it would offer the tool by early 2024. A Chinese version of the product, SEIDA said, would "break through the foreign monopoly," helping China become self-reliant in chip technology. SEIDA's ultimate goal, according to one slide: "Become OPC leader in the world."

The pitch attracted powerful Chinese investors.

One backer, recent corporate filings reviewed by Reuters show, is an investment arm of Semiconductor Manufacturing International Corp, or SMIC. The state-backed, Shanghai-based company is China's leading maker of microchips. U.S. companies are restricted by Washington from providing technology to SMIC without a special license because its alleged work with China's military is considered a threat to American national security.

SMIC didn't respond to Reuters' requests for comment about the investment or the U.S. restrictions.

On a recent visit to SEIDA's headquarters in Hangzhou, in eastern China, a receptionist told Reuters that Zhang wasn't available for an interview. In an email after the visit, Peilun "Allen" Chang, SEIDA's chief operating officer, said the prospectus reviewed by Reuters is "obsolete."

The company's objectives have evolved, he wrote, adding that its backers are primarily "private institutions and individuals." Chang declined to specify how much capital SEIDA has raised or what products it now aims to pursue, saying its business plan remains "under continuous evaluation."

Siemens EDA, in a statement, confirmed Zhang's departure and that of three other colleagues. The company said it considers SEIDA "a potential competitor" but declined to comment further.

Reuters couldn't determine whether SEIDA has progressed toward selling OPC, short for optical proximity correction. The software is commonly employed for the design of many microchips and is part of a broader set of technologies known as electronic design automation, or EDA. The tools can help design chips that could advance strategic new technologies like artificial intelligence, quantum computing and hypersonic flight.

Since SEIDA's launch in October 2021, the U.S. government has increased efforts to curb China's access to EDA tools, developed and sold mostly by American companies.

Through export controls and other restrictions, Washington aims to prevent China from obtaining know-how that could allow it to match microchip advances by the United States and its allies, including Taiwan, the self-governing island claimed by China and the world's leading chip manufacturer.

In email exchanges with Reuters, Chang said U.S. restrictions were one of the reasons Zhang and his colleagues left Siemens EDA for SEIDA to begin with. The restrictions, he wrote, limited their business opportunities at Siemens EDA, "diminishing scope for career advancement and involvement in key projects." .....


Things that make you say Hmmmm...