The United States and China are in a competition over technology. The United States has long been central to the design and manufacture of some of the most important aspects of the electronics and technology sector, thanks to companies like Qualcomm, Intel, Microsoft and Apple. China, however, wants to break its reliance on those critical American providers, and Huawei — one of its most important hardware companies — has been leading that charge.
On Jan. 7 Huawei Technologies Ltd. of China unveiled a new central processing unit for servers — the Kunpeng 920 — and three new TaiShan server models that use the chip. Huawei subsidiary HiSilicon designed the CPU, which is manufactured using a 7-nanometer processor that Huawei claims makes it faster and more efficient than that of its rivals. Perhaps more importantly for China, the CPU uses the design architecture of ARM Holdings and not that of Intel, which has a long-standing relationship with Huawei. The announcement came ahead of the CES 2019 exhibition in Las Vegas, which will not feature Richard Yu, the head of Huawei's consumer electronics division and the keynote speaker at the past two editions, as well as China’s ZTE Corp., which is skipping the show for the first time. Huawei, nevertheless, will still have an exhibit in Las Vegas.
Why It Matters
China has been pushing to wean itself off technology imports, and the new products highlight Huawei's focus on expanding its server and cloud operations. Amazon, Google, Microsoft and others have dominated that important and growing sector on the suite side, while Intel and others have done so on the hardware and design side. In addition, U.S. scrutiny of China and its businesses is intensifying, making the development of Chinese alternatives to Western products more important. The design and manufacturing of semiconductors is one of China's critical weaknesses, but HiSilicon has emerged as a leader in the creation of chips powering smartphones (Its Kirin 980 rivals those designed by Samsung and Apple). With the launch of the Kunpeng 920, the firm is trying to make a dent in the server processor market amid a turf war between U.S.-based Intel Corp. and the United Kingdom's ARM Holdings, now owned by Japan's SoftBank Group Corp. Intel has a 96 percent share of the server market, while its x86 architecture is the dominant format in servers, but the Kunpeng 920 uses the latest version of ARM's architecture. As the United States has moved to crack down on China's tech rise, collaboration between Huawei and ARM has become more important — especially as limits on the export of critical emerging technologies, including those related to microprocessors, are considered. But as Huawei pushes its new CPU, it is going to strain its existing relationship with Intel.
Over the past year, Washington has significantly increased its focus on Beijing's tech ascent, launching a multipronged attack on China's hacking and demands for technology transfers, while also striving to eliminate the weaknesses in the U.S. supply chain. And in a measure clearly aimed at China, two U.S. senators recently proposed the creation of the Office of Critical Technologies and Security, which would guard U.S. technology against state-sponsored theft. In addition, the trade and economic war with Washington has made Beijing realize that the United States may be trying to ensure that China does not become a tech rival. For these reasons, the Chinese push for self-sufficiency has become all the more important. But despite Huawei and HiSilicon's chip-design work, China remains vulnerable when it comes to semiconductor manufacturing. HiSilicon and Huawei must work with fabrication companies, and the most capable ones are not Chinese. Fabrication companies, as well as fabrication equipment manufacturers, ultimately remain the Achilles' heel of China's semiconductor industry.