Shifts towards the internet’s next era are generating an enormous appetite for advanced computer chips, as complex, blockchain-based Web3 applications and immersive metaverse products demand more lightning-fast transmission of data. A global competition involving companies and regulators is now underway to shape the flow of capital, equipment and know-how needed to gain an edge.
Considerable attention has been directed recently to Semiconductor Manufacturing International Corporation (SMIC), a clunkily-named Shanghai-based firm that is now China’s leading chipmaker.
News emerged several weeks ago suggesting that SMIC had achieved a potentially monumental breakthrough with the production and shipping of 7nm chips – a feat accomplished by just a handful of top firms – despite the challenges presented by US sanctions restricting tech transfers to China that began in late 2020.
A report by Canadian market analysis firm TechInsights showed how its researchers had deduced through reverse engineering that the MinerVa Bitcoin Miner contained a 7nm chip produced by SMIC.
“This is the most advanced technology product we have seen from SMIC since we analyzed their 14nm technology,” the TechInsights report reads. “This serves the Chinese advanced product companies who have been restricted from access to advanced technologies available from TSMC, Samsung and other cutting-edge foundry service providers.”
Markets reacted positively to the revelation, and the firm’s most recent financial report, released on August 11, brought more good news. During the second quarter, SMIC’s revenue rose 41.6% year-on-year, exceeding market expectations and bucking sanctions.
Given these developments, things appear rosy for SMIC. But a closer look reveals a few lingering vulnerabilities.
Firstly, the 7nm chip reported with great fanfare last month is likely not as advanced as other similarly labelled products on the market. The distinction between the highest echelons of semiconductor technology has become rather blurred, requiring a more in-depth analysis of new products’ features in order to assess their true capabilities.
The same TechInsights report acknowledges that devices used for mining cryptocurrency, such as the product from MinerVa in which the new chip was found, tend to have lower data storage needs. Accordingly, SMIC’s chip likely doesn’t qualify as 7nm under stricter definitions of the technology.
“This chipset likely demonstrates the logic part but not the bitcell [memory] aspect,” the report reads.
Dylan Patel, who was the first to draw attention to the TechInsights report in his SemiAnalysis Substack, told Pandaily that “it’s an odd thing to split a node up without having something as critical as bitcell memory, but it also has precedent. Intel, for example – their 4nm process has no high-density libraries or IO/analog libraries.”
Regardless of whether SMIC’s 7nm technology stacks up against true definitions of 7nm technology, the development undoubtedly brings the firm closer to striking distance of the “big three,” a grouping of the world’s top chipmakers that includes Samsung, Intel, and TSMC.
However, there are scant signs to suggest that the road ahead will become any less rocky for SMIC throughout the next few years. Solidifying confrontation between Beijing and Washington will likely make it more difficult to obtain key equipment and resources, raising the barrier to entry for non-elite firms in an already highly competitive industry.
This strained atmosphere likely offers insight into SMIC’s decision to keep a low profile on its potential breakthrough. Amid an absence of any formal announcement by the Shanghai-based chipmaker, its customer – MinerVa – stated on its website that the product had been in mass production since July 2021.
“SMIC, on the other hand, is clearly trying to hide it,” says Dylan Patel. “They merged their 14nm FinFET [a kind of transistor] revenue reporting into 28nm revenue earlier to hide how much they ramped 14nm FinFET. They hid their start of 7nm manufacturing as well.”
He added, “My assessment is they want to hide that they have caught up so they can avoid the eye of US government sanctions.”
The stage is now being set for what appears to become a more head-on contest for supremacy of the global semiconductor market. Earlier this week, President Biden signed into being the CHIPS and Science Act, a rare bipartisan agreement that will allocate $54 billion to the semiconductor industry, along with tight restrictions pertaining to fund recipients’ operations in China.
Meanwhile, Beijing has been accelerating efforts to shore up its own capacity in the vital field. As part of a broader Made in China 2025 initiative, the country plans to achieve 70% domestic supply of computer chips by 2025, doling out generous subsidies to local industry players.
Tudor Brown, the former president of UK-based tech giant Arm, announced yesterday in a LinkedIn post that he would be resigning from the SMIC board, which he had served on for nine years. Originally lamenting that “the international divide has further widened,” Brown later amended the announcement to be more circumspect.
In the face of headwinds such as the executive’s departure and ongoing international restrictions, SMIC’s status as the leading chipmaker based in mainland China amid a hastening semiconductor arms race means that it will likely continue to play a significant role in the transforming digital ecosystem for years to come.