Huawei's 7nm Chip Stalls Expose China's AI Weakness--While Rivals Race Ahead

Huawei's latest foldable MateBook looks sleekbut under the hood, it's running on old tech. The chip inside? A 7nm processor made by SMIC, China's top foundry. Same tech Huawei used back in 2023 for its Mate 60 Pro. According to TechInsights, there's been no real breakthrough since. That puts Huawei three generations behind Taiwan Semiconductor Manufacturing Co., which is gearing up to mass-produce 2nm chips later this year. The message: despite China's push for self-reliance, catching up in semiconductors is proving harder than expected.

Export controls appear to be doing exactly what they were designed to doslow China down. With ASML still blocked from selling EUV lithography machines to Chinese firms, SMIC hasn't yet cracked scalable 5nm production, which is the entry ticket to high-end AI, cloud, and mobile chips. Washington's restrictions on Nvidia NVDA chips have also kept Huawei boxed out of the training game for top-tier AI models. Even so, Huawei has leaned into homegrown solutions, running its new devices on HarmonyOS and stacking chips to try and bridge the performance gap.

But scale is the real testand here's where the ceiling hits. U.S. officials said Huawei could be capped at just 200,000 units of its Ascend AI chip in 2025, a far cry from global AI leaders. Still, founder Ren Zhengfei isn't backing down. In a recent interview, he brushed off the impact of sanctions and pointed to workarounds like chip stacking. Investors watching China's tech race will be asking the obvious question: is that enough to stay in the gameor just enough to survive?