
Huawei builds up 2-year reserve of 'most important' US chips - doener
https://asia.nikkei.com/Spotlight/Huawei-crackdown/Huawei-builds-up-2-year-reserve-of-most-important-US-chips
======
DiogenesKynikos
The US is trying to block China's access to EUV lithography devices as well,
which are required to fabricate chips at the 7nm scale and below. The
lithography machines that Chinese companies (in particular, SMIC) want to buy
are produced by a Dutch company, ASML. The US government recently pressured
the Dutch government into blocking a sale of such machines by ASML to SMIC.[1]

The US government has identified EUV lithography as a bottleneck in the
semiconductor industry, and is trying to keep that bottleneck in place, as a
pressure point that can be used against China in the future. The Brookings
Institution has laid out the strategy.[2]

Of course, that means that the Chinese government will now probably invest
heavily in domestic lithography companies. The Brookings Institution thinks
that the US can shut China out of high-end semiconductor production
indefinitely. That seems like a pretty foolish conception to me.

1\. [https://www.reuters.com/article/us-asml-holding-usa-china-
in...](https://www.reuters.com/article/us-asml-holding-usa-china-
insight/trump-administration-pressed-dutch-hard-to-cancel-china-chip-
equipment-sale-sources-idUSKBN1Z50HN)

2\. [https://www.brookings.edu/wp-
content/uploads/2020/04/FP_2020...](https://www.brookings.edu/wp-
content/uploads/2020/04/FP_20200427_computer_chips_khan_flynn.pdf)

~~~
rfoo
That's not foolish. Modern lithography technology (and in general high-end
semiconductor production) is complicated enough that neither US nor China may
catch up in reasonable time, if they are targeting a domestic supply chain.

That said, the caveat here is the "neither US nor China" part, why would ASML,
a Dutch company, align itself with US?

~~~
skrebbel
Yes it is foolish.

I know quite some people at ASML and I worked a bit in lithography in the
past. Yes, it's extremely hard to make a machine that can compete with ASML's.
But given enough smart people, I'm convinced that it's totally possible.
Making a machine that can compete with what ASML could do, say, 20 years ago
is a matter of 10 people and 2 years (I did some contracting at a company that
did just that). If you start there and then just keep adding the right kind of
talent, then I bet in 10-15 years you can get impressively close.

Don't underestimate the _enormous_ amount of technical and engineering debt
ASML has accumulated through decades of mad deadline pushing. Nobody has time
to invest in eg automated tests or anything that lets you guard code quality
because all the good engineers are needed on the critical path to make the
next deadline, and there's always a next deadline and it's always 3 months
sooner than in any way reasonable. This is how they became a world monopoly,
effectively. It's been a good strategy. They ship so early that the machines
they sell simply don't work yet, so they put two engineers inside the box with
it who (together with 50 more engineers back home) make the thing actually
work while the customer sets it up in their fab.

As a result, their codebase is _a steaming pile of shit_. Copy & paste galore.
An example: the code is so bad that you can't just fix bugs. If you find an
off-by-one error in the code and you want to fix it, you first write a "risk
assessment document" where you describe what the bug does and whether any code
could potentially rely on the presence of the bug. Then multiple layers of
risk assessment officers assess whether you get a go. Then, if you get a go,
you can go and fix your off-by-one error in similar-but-not-the-same C files
across 7 product families.

To be honest I don't know if the same holds for ASMLs mechanical engineering,
physics, electro etc departments, but their software dept (a _large_
percentage of their entire R&D) is easily 10x less productive than similarly
sized and skilled software teams elsewhere. It's really mind boggling.

I'm convinced that a good startup with a good mindset, plus sufficiently good
funding, can totally build a competitor. China just has to fund 20 litho
startups so that 19 can mess it up and 1 makes it big.

~~~
andy_ppp
I think you should write out that YC application... oh and just start
believing you’re the one who’s actually going to do it because you are ;-)

~~~
skrebbel
My odds would be pretty bad cause I still think a startup like this has like a
1 in 20 chance of succeeding. Plus to be frank I doubt YC is good enough about
high tech hardware stuff (that isn't a 100% hype play like Cruise) to be able
to add much value, but that's another story :-)

~~~
andy_ppp
Access to the right people is the point, I’d say YC giving this a punt would
involve a huge amount of just talking to the right people and trying to get
them onboard. No harm in trying to get meetings with people and try it on.
That’s how these things get off the ground. I agree with you but they aren’t
exactly biotech or AI experts either, what they can help with is getting
started...

------
chvid
As I understand it the big challenge is to replicate the chip manufacturing
done by TSMC today. From what I have read mainland China is still years away
from doing that.

~~~
ahmedalsudani
China already had the “Made in China 2025” initiative, and I imagine they’re
putting a lot more money into similar efforts right now.

They will likely

1\. Close the gap at a faster rate

2\. Make life difficult for Taiwan unless Taiwan relents

We’re probably entering into a rough patch of human history for a lot of
people.

------
Nokinside
If Huawei is still blocked after stockpiles runs out, they have to start
buying standard components from MediaTek or Samsung. There is no good non-
American substitute for Xilinx.

MediaTek’s flagship Dimensity 1000 5G Chipset is fine, so is Exynos 990. They
are just slightly behind Snapdragon 855+ and A13

Edit: in case it's not clear, FPGA's are used in wireless base-stations.

~~~
zxcmx
Interesting to speculate on the engineering workarounds if all FPGAs
disappeared tomorrow. I'm not sure there's a big long-term impact.

Maybe more shift to more to DSP, make low volume ASICs on older nodes cheaper
and cycle faster, put up with more card swaps since you can't update certain
things in firmware so easily.

You can still do all the things but maybe the design takes longer or you
sacrifice some performance (designer gets to choose the tradeoff).

My guess is the main "real" impact is cycle times, design retooling and having
to pause and rework existing designs suffering from supply chain disruption.
Potentially all problems you can fix scalably by throwing enough bodies at
them since the money is clearly there.

Would be interested in perspectives from anyone working in a related area.

------
logicchains
This sounds like a great opportunity for organised crime. I imagine China'd be
willing to pay at least as much for smuggled chips as drug consumers in many
places pay for smuggled drugs, so it represents a huge opportunity for US-law-
nonabiding middlemen.

~~~
mayama
More of a target for espionage or cyber espionage. These lithography, semicon
machines are low in number and expensive. Companies can't run gray batch for
these and hide the profits, especially when they have good backlog of orders.
So, these are good target for espionage, like it already is.

------
Barrin92
I think this decoupling attempt is unwise and will cost the US a lot of cash
long term. There's too much at stake for China to ever back down, and it won't
take them long to catch up in chip production. It's going to hurt them for a
while but at the end of the day the US will have thrown a gigantic market away
it could have comfortably owned. The strategic sector for Huawei is 5G, and it
can trivially get enough chips for that. It will hurt their smartphone sector
but the government can jump in if necessary to dampen the impact.

Same with the Google Play Store embargo on Android. It just robs American
companies of a market where they had a lead while it accelerates China's
ambitions.

~~~
jorblumesea
I see this argument all the time and just don't get it. China is basically
stealing everything from source code, hardware schematics, materials science
research.

It might accelerate this a bit, but China already had its sights on a domestic
semiconductor solutions years ago.

The idea that they were going to ever let the US just "have the market" isn't
how China does things. One way or another, China is going to copy everything
the US does. It's just kicking the can down the road another 5 years or so.

It's not a solution.

------
xupybd
Has the US disclosed why they are cracking down so hard on this one company. I
know they are seen as a security threat and a puppet of the Chinese government
but has there been a statement explaining what's going on here?

~~~
est
> Has the US disclosed why they are cracking down so hard on this one company.

I read somewhere that the simplest counter measure Huawei can take is to show
it's a private company, by publishing its shareholder structure, thus renders
the crack down illegal.

But Huawei won't.

~~~
feisuzhu
Huawei is basically owned by all the employees(98.99%), and Ren Zhengfei only
owns 1.01%.

~~~
iaw
Wikipedia seems to disagree with your assertion:

[https://en.wikipedia.org/wiki/Huawei#Ownership](https://en.wikipedia.org/wiki/Huawei#Ownership)

It may ostensibly be owned by the employees but there's a more complex
ownership structure involved than what a normal company would have.

" Scholars have found that, after a few stages of historical morphing,
employees do not own a part of Huawei through their “shares”. Instead, the
“virtual stock is a contract right, not a property right; it gives the holder
no voting power in either Huawei Tech or Huawei Holding, cannot be
transferred, and is cancelled when the employee leaves the firm"

~~~
feisuzhu
You are right, this aligns what I know about.

------
drevil-v2
Interesting comment in the article from one of their sources

> It (Huawei) is preparing stocks for wartime

Strange word/terminology to use for something they have apparently been doing
since end-2018

~~~
TazeTSchnitzel
Which is about when the US started getting really aggressive about Huawei?

~~~
christophilus
The US and China have been in a Cold War for longer than 3 years. This didn’t
start with Trump, and it won’t end with him. Trump is just an inarticulate
accelerant in an already unfolding geopolitical catastrophe.

------
thcleaner999
Good for them intel processors hasn’t changed last 2 years

------
ogre_codes
Seems to me that buying a 2 year supply of CPUs is not a great strategic
measure since 2 years out your competitors will have faster chips or paying
far less than you in 2 years for the chips sitting in your inventory.

Obviously if the alternative is to _not have CPUs_ , it's the only choice they
have, but its going to put them in a rough place competitively.

~~~
notatoad
there's still a ton of new phones shipping with two-year-old chips in them.

obviously, for new designs they won't choose to integrate chips that they
can't source, but having a supply of chips they can no longer source means
they can continue to manufacture their current models.

------
082349872349872
Since 2018? Plenty of time to have run some Westlaw/LexisNexis searches in
between.

According to the Phase-1 agreement, China should buy at least USD 68B of US
services in 2020. If they were to spend most of it on counsel, that'd be a lot
of nastygrams, even at common-law billing rates.

------
wwarner
I think it's important that the next big advances in computing are developed
in the West. That's why the proposed NSF Technology Directorate [1] is so
important.

[1] [https://www.sciencemag.org/news/2020/05/us-lawmakers-
unveil-...](https://www.sciencemag.org/news/2020/05/us-lawmakers-unveil-
bold-100-billion-plan-remake-nsf)

~~~
cheez
That first sentence is vague enough to lose hope.

------
0xFFC
Excuse my ignorance, why Huawei just does not ditch snapdragon and only
improve/use HiSilicon Kirin?

------
purmac
EDA tools are possessed by US companies. It is not easy to close the gap i
think.

~~~
raverbashing
I wouldn't be worried about those. I'm sure China can easily find "alternative
sourcing" for them (also the version they have right now is probably
sufficient for some time)

~~~
antpls
There could be a revolution regarding EDA thanks to ML :
[https://ai.googleblog.com/2020/04/chip-design-with-deep-
rein...](https://ai.googleblog.com/2020/04/chip-design-with-deep-
reinforcement.html?m=1)

Google publicized about it, is China at the same level?

------
thePunisher
Those stocks will run out eventually. Huawei is probably betting on the
sanctions being resolved through negotiations and the Chinese government
making concessions on trade.

However, I wouldn't count on this happening since the U.S. knows very well the
power of being able to spy on adversaries and allies using network and telecom
equipment. I don't believe Trump will back down on Huwawei no matter what the
Chinese government offers.

~~~
temac
SMIC already produces at 14nm. You can cover _lots_ of things with that.

~~~
thePunisher
Apparently not enough as Huawei seems pretty nervous about it. If your
competition is using 7nm and 5nm parts and you're stuck in the past with 14nm
your market share will erode very quickly, especially in the smartphone
business.

Mind you that other Chinese smartphone makers do not (as of yet) face the same
restrictions and are able to purchase the newest parts. What chance does
Huawei stand against them, even in the Chinese market? I'd say very little.

------
loyukfai
Personally I feel that the probability of a major conflict between China and
the US has increased substantially since the beginning of the 2020.

We live in interesting time.

Cheers.

~~~
dragonsh
Such conflict will be disaster for the whole humanity, so the probability of
such conflict is not that great except some small skirmish here and there.

I will not count on difficulty of technology to stop a country progress for
long. China mastered bullet trains and surpassed the original designs from
German, French and Japanese designs, so given time and resolve they will be
able to solve given, at present USA closing doors and China opening doors for
educated immigrants.

I hope the world instead of focusing on differences, focus on collaboration,
USA and its system has its own pros and cons so is China’s system. Also in
general I believe no meaning in forcing Chinese to accept what’s right for
them based on US ideas, let them have their own freedom to choose and work or
change their system. As US has black minorities and Puerto Rico (overseas
territory), so does China (Hong Kong and Taiwan). Let them figure out in their
own way how to work out between their majority and minority. This is what US
or any sovereign country irrespective of system will expect. If China tries to
teach USA how to treat and respect its minorities and overseas territory they
won’t agree, same is China.

~~~
vinay427
Both have overseas territories, except that means virtually nothing in and of
itself. Do a majority of Hong Kongers (let alone Taiwanese) support the status
quo or closer integration with mainland China? Did they choose to join in the
first place through an election?

~~~
dragonsh
Did Indian govt respect vote in Kashmir (Hong Kong and Taiwan enjoy a lot of
freedom I can’t say the same for Kashmiris who are still prisoners at military
gunpoint in their own place)? Did US tried votes for black minorities if they
want to form a separate country or in Guam and Guantanamo Bay or even accepted
the verdict of the people of Puerto Rico and these 2 are the largest
democracies. If in a majoritarian politics outcome for minority is same as
China than really both systems are having an issue with protecting minorities.

Even in HN by downvoting comments minority view is turned unreadable, this is
same in USA, India or China where systems work based on majoritarian politics.

------
andarleen
I yet have to understand why Chinese companies are not getting the same
treatment in the US as US companies get in china. In the EU i understand -
germans need to sell cars there, but in the US it is beyond me given the POTUS
is “against” China.

~~~
qihqi
The US need to sale the iPhones?

------
redis_mlc
Sounds like they're working around a US embargo, which got Huawei CFO Meng
Wanzhou detained.

~~~
pinkfoot
Out of curiosity, in which legal system, is legally buying up stock months
BEFORE an embargo is announced considered a crime?

Retrospective law does not exist in civilised societies.

~~~
trhway
This [1] sounds like an embargo workaround which can get people to prison
[IANAL] (for example those Russian immigrants [2] got arrested for doing
similar thing with Xilinx chips few years ago)

[1] "... Huawei has not been able to directly buy chips from American
companies without special approval since last May. However, it has been able
to continue building its inventory of American chips through other available
channels -- such as local chip distributors and traders, or even asking its
own suppliers to buy the chips for it, sources familiar with the matter said.
Huawei has been willing to pay far higher prices than normal for the chips,
despite the fact the company can only secure "off-the-shelf" versions without
customization or technical support, they said."

[2] [https://www.justice.gov/usao-ndca/pr/san-francisco-man-
and-c...](https://www.justice.gov/usao-ndca/pr/san-francisco-man-and-company-
indicted-smuggling-sophisticated-electrical-components)

