At the beginning of August 2023, China officially implemented new export regulations concerning gallium and germanium, as well as products containing them. This move is widely perceived as a response to recent restrictions imposed on China's semiconductor industry by the United States, Japan, and the Netherlands. These fresh export rules could potentially have a significant impact on the semiconductor sector, particularly affecting Japanese factories.

One month in and Huawei Technologies’ recent stride in developing an advanced chip has ignited fresh debates in the ongoing US-China tech war. Huawei Technologies, in collaboration with China's leading chip manufacturer, SMIC, has achieved a significant milestone in the development of an advanced 7 nanometer (nm) processor.

TechInsights, an analysis firm, unveiled this breakthrough, which powers Huawei's latest smartphone, the Mate 60 Pro. The unveiling of the Mate 60 Pro smartphone, powered by the proprietary Kirin 9000s chip and manufactured using cutting-edge 7 nm technology by SMIC, is a testament to China's resilience against US sanctions. This achievement signifies China's progress in high-end chip development, even as Washington has intensified its efforts to restrict access to advanced chipmaking tools.

Experts acknowledge the significance of China's semiconductor industry advancements without relying on extreme ultraviolet lithography (EUV) tools, highlighting the nation's technological prowess. However, this accomplishment poses a substantial geopolitical challenge to countries that have sought to limit China's access to critical manufacturing technologies, potentially leading to more stringent restrictions in the future.

TechInsights' findings might trigger an investigation by the US Commerce Department's Bureau of Industry and Security. This could also stimulate further discussion in the US regarding the efficacy of existing sanctions and potentially lead Congress to impose even stricter tech sanctions against China as part of a competition bill. While the US Department of Commerce remained silent on these developments, it's evident that the US-China tech war is poised to escalate.

SMIC's previous reputation was built on manufacturing 14nm chips, as it was denied access to EUV machines in 2020 due to US restrictions. However, analysts hinted that SMIC managed to produce 7 nm chips by modifying simpler deep ultraviolet lithography (DUV) machines. It is thought that Huawei may have acquired the necessary technology and equipment from SMIC rather than collaborating on chip production.

Overall, the US controls on technology exports to China are imposing substantial costs on producing controlled technologies within the country, with the Chinese government likely covering a significant portion of these expenses.

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