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Huawei bets big on chip packaging to counter US clampdown


China’s Huawei Technologies is aggressively ramping up its chip packaging capabilities to lessen the impact of a US clampdown that has cut the company’s access to vital semiconductor production technologies, sources briefed on the matter told Nikkei Asia.

Chip packaging refers to the final step in semiconductor manufacturing before they are mounted on to print circuit boards and assembled into electronic devices. Compared to the manufacture of chips themselves, less of the relevant technology is controlled by American companies. Washington has cut off Huawei’s access to advanced US chipmaking technologies since 2019, citing national security concerns.

One example of Huawei’s new focus is a recent collaboration with Quliang Electronics, a little-known chip packaging and testing supplier based in Fujian province. Quliang is rapidly expanding its production capacity in the city of Quanzhou to help Huawei put its advanced chip assembly designs into production and trial some of the company’s cutting-edge chip stacking and packaging technologies, four people familiar with the matter told Nikkei Asia.

The Fujian government is among the most supportive of Huawei’s ambition to beef up its chip packaging capabilities, the sources added, though the company is also looking for manufacturing partners in several other provinces. Additionally, Huawei in late December established a new subsidiary, Huawei Precision Manufacturing, with a paid-in capital of Rmb600m ($94.5m), in Shenzhen to tap electronics manufacturing. One of the new subsidiary’s key aims is to develop chip packaging technologies, sources familiar with the matter said.

The embattled tech giant has also accelerated efforts to hire experts from leading suppliers such as ASE Technology Holding of Taiwan, the world’s top chip packing and testing service provider, sources told Nikkei Asia. ASE declined to comment.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Partnerships with local tech giants are another strategy Huawei is pursuing. The company has teamed up with display champion BOE Technology Group to develop panel-level chip packaging technology, in which chips are assembled on display panel-like substrates, rather than on the usual wafer materials, people familiar with the matter said. This novel approach is gaining traction among new and established industry players, such as Powertech Technology, the world’s biggest memory chip packaging service provider.

Such moves are part of Huawei’s ongoing push to improve its overall chip capabilities. In 2021 alone, the company’s investment arms — including Hubble Technology Investment — took or raised stakes in more than 45 domestic tech companies, Nikkei Asia analysis showed, more than double the figure in 2020. Some 70 per cent of its investments last year were in semiconductor-related suppliers, ranging from chip developers and design tools to production equipment and materials.

Chip packaging specifically has emerged as a major battleground for the world’s top chipmakers, namely Samsung, Intel and Taiwan Semiconductor Manufacturing, as they seek to produce ever more powerful chips.

Previously, semiconductor development primarily focused on how to squeeze more transistors on to a chip — in general, more transistors translates to greater computing power. But as the space between transistors has shrunk to just a few nanometres, this approach has become more difficult, leading some to predict the end of Moore’s law, the postulation that the number of transistors on a chip will double every two years.

In response, the world’s top chipmakers and developers have begun devoting more resources to the previously neglected area of chip packaging, developing new ways of placing or stacking chips together to boost performance.

Intel CEO Pat Gelsinger himself has stressed the importance of chip packaging.

“Most importantly, packaging. Packaging is now leveraging silicon processes even [more broadly],” he said in video remarks delivered at an Intel forum in Taipei on January 9, adding that chip packaging, along with cutting edge production methods, would help the chip industry maintain or even surpass the pace of Moore’s law over the next decade.

For Huawei, the appeal of this approach is the existence of several non-US suppliers of chip packaging equipment. This means Chinese companies have alternatives for developing a self-reliant supply chain that is not vulnerable to US sanctions. The production lines for advanced chip manufacturing and fabrication, by comparison, are dominated by a handful of US equipment makers such as Applied Materials, Lam Research and KLA.

Since it was first placed on a US blacklist in 2019, Huawei has never given up its goal of advancing its chip capabilities, the core competitiveness that helped it become the largest Chinese tech company. Its semiconductor design arm, HiSilicon Technologies, enabled Huawei to challenge Apple, Qualcomm and MediaTek in mobile processors, and is still China’s top chip developer.

Meanwhile, Huawei is dispatching teams to build several mini production lines in Shenzhen, Shanghai and Wuhan in collaboration with domestic contract chipmakers to put different chip designs into trial production, multiple sources briefed on the matter told Nikkei.

Huawei’s aggressive investment in domestic semiconductor-related companies, particularly those in areas controlled by US companies, is in line with Beijing’s campaign to build a secured, controllable supply chain amid the ongoing US-China tensions, Nikkei Asia reported earlier. The company also expanded its talent hunt to Europe, Central Asia and Canada to maintain its technological progression.

Brady Wang, a tech analyst with Counterpoint Research, said Huawei had a record of identifying and investing in key technologies for the longer term, as it did with mobile chips for more than a decade.

“It’s natural that Huawei will further identify some key areas to move forward its technologies and bet new rounds of investments, especially as it suffered the most in the current geopolitical conflicts,” Wang said. “However, it’s not possible for any company, country or region to be fully self-reliant. Putting current US-China tensions into context, all countries, regions and companies will definitely need to secure some key edges and vital technologies — like how Japan has crucial chipmaking materials — that they can later use to negotiate or compete on the global stage.”

A version of this article was first published by Nikkei Asia on January 12 2022. ©2022 Nikkei Inc. All rights reserved

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