China Blacklists Chip Research Firm After Huawei Report

Beijing has escalated its control over information flow within its semiconductor industry by banning semiconductor research firm TechInsights from engaging with or receiving data from Chinese entities. This move, ostensibly citing national security concerns, is likely to further obscure transparency within China’s burgeoning, yet increasingly scrutinized, chip landscape.

China’s Commerce Ministry announced Thursday the designation of TechInsights as an “unreliable entity.” This designation effectively prohibits Chinese individuals and organizations from sharing information or collaborating with the Canadian-based firm. The implications of this ban extend beyond TechInsights, raising concerns about access to critical data points that global investors and analysts rely on to gauge the progress and true capabilities of China’s domestic chip production efforts.

TechInsights has gained prominence for its detailed analyses of Chinese-made chips, providing crucial insights into the technological advancements (or lack thereof) achieved by companies like Huawei Technologies. The firm’s teardowns and reports have often pierced the veil of secrecy surrounding China’s semiconductor ambitions.

This crackdown follows closely on the heels of TechInsights’ report on Huawei’s latest “Ascend” AI chips. Their analysis revealed the presence of components sourced from outside mainland China, potentially undermining claims of complete self-sufficiency in chip manufacturing – a strategic priority for Beijing. Independent corroboration from firms like SemiAnalysis further supports the notion that Huawei continues to rely on international suppliers such as Samsung Electronics and Taiwan Semiconductor Manufacturing Co (TSMC), despite U.S. export controls.

Neither TechInsights nor Huawei have released an official statement addressing the ban. However, industry insiders suggest that Beijing’s move is a direct response to the unflattering light shed on Huawei’s reliance on foreign technology. Some interpret it as an attempt to control the narrative surrounding China’s progress in achieving semiconductor independence, particularly as it seeks to challenge U.S. dominance in the AI chip space currently led by Nvidia.

The situation is further complicated by the U.S. trade blacklist that Huawei has been on since 2019. This blacklist restricts companies that do business with the U.S. from directly collaborating with Huawei, compelling the latter to find alternative channels for sourcing components and manufacturing capacity.

China has invested heavily in building a self-sufficient semiconductor supply chain, with Huawei playing a pivotal role in developing alternatives to U.S. chip giants. However, TechInsights’ findings suggest that full autonomy remains elusive, highlighting the challenges in replicating the complex and highly specialized global chip ecosystem.

While details surrounding Huawei’s chipmaking endeavors remain scarce, reports indicate a close collaboration with China’s leading chip foundry, SMIC. However, both companies have maintained silence on this potential partnership since Huawei’s placement on the U.S. trade blacklist, adding to the speculation regarding the true extent of their cooperation. The increased opacity will likely drive global analysts to focus on leading overseas fabrication facilities, such as TSMC and Samsung, who continue to manage international supply chain restrictions to China.

Last year, TechInsights reported that a Huawei product contained a chip component from TSMC, raising questions about the effectiveness of U.S. export controls. The research firm’s latest findings on Huawei’s AI chip could further amplify these concerns, and potentially trigger a renewed review of U.S. export regulations.

Analysts have pointed out that Chinese companies may be exploiting loopholes in U.S. restrictions, utilizing stockpiles of imported chips and components acquired before the implementation of certain restrictions. The continued effectiveness of these strategies, combined with Beijing’s attempts to control information flow, will be critical factors in determining the future trajectory of China’s semiconductor industry.