China downplays reports of Taiwanese firms helping Huawei’s chip project, saying they are ‘not part of semiconductor supply chain’

The State Council’s Taiwan Affairs Office said the firms mentioned in media reports did not produce products related to semiconductors
Last week, Taiwan’s government opened an investigation into four companies for allegedly conducting business with Huawei

Semiconductors

Tracy Quin Shanghai

Published: 7:30pm, 11 Oct 2023

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China’s Taiwan affairs office has accused Taipei of “obstructing” cross-strait economic cooperation after the ruling Democratic Progressive Party (DPP) said it would investigate four Taiwanese firms that were reportedly helping mainland Chinese telecommunications giant Huawei Technologies in chip production.

Chen Binhua, a spokesman for the State Council’s Taiwan Affairs Office, told a media briefing on Wednesday that the firms mentioned in media reports were “not part of the semiconductor supply chain” and did not produce chip-related materials, equipment and products.

“The [DPP] authorities took the opportunity to follow the trend and hype, trying to obstruct normal cooperation between cross-strait enterprises and create obstacles to cross-strait economic and trade exchanges,” Chen said.

After Huawei chip, the next Chinese semiconductor breakthrough will be harder

The four companies named in a Bloomberg news report – Topco Scientific, L&K Engineering, United Integrated Services and Cica-Huntek Chemical Technology Taiwan – allegedly conducted business with Huawei, which is under US sanctions.

Last week, Taiwan’s Minister of Economic Affairs Wang Mei-hua said her agency would launch a probe into the relationship, but noted that the firms were not directly engaged in semiconductor production. Rather, they provided peripheral services required for chip manufacturing, such as waste water treatment.

Taipei is now considering imposing tighter rules on the export of key technologies from the island.

Analysts have concluded that the 7-nanometre chip in Huawei’s latest 5G smartphone, the Mate 60 Pro, was produced by Shanghai-based Semiconductor Manufacturing International Corp (SMIC) using deep ultraviolet lithography systems. US export restrictions have barred the more advanced extreme ultraviolet machines from being shipped to China since 2019. That chip, designed by Huawei subsidiary HiSilicon, likely pushed the boundaries of what is achievable with SMIC’s existing equipment, according to experts.

Silicon wafer images are displayed at the Taiwan Semiconductor Manufacturing Co museum in Hsinchu Science Park, July 5, 2023. Photo: AFP

Taiwan’s share of the global chip manufacturing supply chain – covering wafer foundry work and final assembly and test – is expected to decline over the next few years, while mainland China’s will continue to increase amid changes brought about by various governments’ semiconductor policies and geopolitical tensions, according to a report by market research firm IDC.

“Geopolitical shifts are fundamentally changing the semiconductor game,” Helen Chiang, IDC’s Asia-Pacific semiconductor research lead and Taiwan country manager, wrote in a recent report.

China’s share of the semiconductor supply chain will receive a boost after Washington granted a permanent waiver allowing South Korean memory chip makers Samsung Electronics and SK Hynix to buy advanced US chip production tools for use in their mainland Chinese wafer fabs.

However, analysts said the move would not benefit domestic Chinese memory chip makers like Yangtze Memory Technologies Co, which are still subject to export restrictions.