The Unexpected Technological Leap
In a development that has surprised industry analysts worldwide, Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip manufacturer, has reportedly achieved 5-nanometer (nm) chip production capabilities. This advancement represents a significant technological milestone for China’s semiconductor industry, especially considering the extensive export controls imposed by the United States since 2020.
According to recent reports from TechInsights and other semiconductor research firms, SMIC has successfully manufactured chips for Huawei’s latest Kirin processors using a process that appears equivalent to 5nm technology. This achievement comes despite SMIC being restricted from accessing advanced lithography equipment from companies like ASML, which produces the extreme ultraviolet (EUV) lithography machines typically considered essential for manufacturing at nodes below 7nm.
The significance of this breakthrough cannot be overstated. For context, the semiconductor industry has followed Moore’s Law for decades, with companies striving to double transistor density approximately every two years. The 5nm node represents one of the most advanced manufacturing processes currently in commercial production worldwide. Until recently, only Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung had demonstrated the capability to mass-produce chips at this level of miniaturization. SMIC’s entry into this exclusive club represents a fundamental shift in the global semiconductor landscape.
Navigating Around Export Controls
The U.S. export controls were explicitly designed to prevent Chinese companies from advancing their semiconductor manufacturing capabilities beyond 14nm. These restrictions were implemented based on national security concerns and the growing technological competition between the United States and China.
SMIC’s apparent success in developing 5nm manufacturing capabilities suggests the company has found innovative workarounds to these restrictions. Industry experts speculate that SMIC may use multiple patterning techniques with older deep ultraviolet (DUV) lithography equipment. While more complex and potentially less efficient than EUV lithography, this approach demonstrates remarkable engineering ingenuity.
The company is believed to have adapted existing DUV lithography machines from ASML and combined them with domestically developed processes and equipment. This approach requires significantly more manufacturing steps and likely results in lower yields and higher costs compared to the methods used by industry leaders like TSMC and Samsung.
What makes this achievement particularly noteworthy is the technical complexity involved. Traditional semiconductor manufacturing wisdom held that producing chips at 5nm without EUV lithography would be prohibitively difficult and economically unfeasible. SMIC appears to have challenged this assumption through innovative process engineering, substantial financial investment, and likely thousands of iterations of trial and error. The company has reportedly invested heavily in research and development, recruiting top talent from global semiconductor firms and establishing partnerships with Chinese universities to solve these complex technical challenges.
Economic and Geopolitical Implications
The implications of SMIC’s advancement extend far beyond technological achievement. For China, this represents a significant step toward semiconductor self-sufficiency—a key goal in the country’s 14th Five-Year Plan and its broader “Made in China 2025” initiative.
Economically, the development could reshape global semiconductor supply chains. While SMIC’s 5nm process may not match the efficiency or cost-effectiveness of TSMC’s equivalent technology, it provides Chinese device manufacturers like Huawei with access to advanced chips despite being cut off from global suppliers.
From a geopolitical perspective, this breakthrough challenges the effectiveness of export controls as a means of technological containment. It suggests that determined national efforts, backed by substantial resources and engineering talent, can overcome significant barriers to technological advancement.
The semiconductor industry has become a central battleground in the broader technological competition between major powers. China’s annual chip imports exceed $300 billion, surpassing its oil imports in value. Chinese leadership has viewed this dependency as a strategic vulnerability, especially as tensions with the United States have increased. SMIC’s achievement potentially reduces this vulnerability and gives China greater technological autonomy in a critical sector.
This development raises questions about the long-term viability of export control regimes for the United States and its allies. The Biden administration has continued and expanded many of the semiconductor restrictions implemented during the Trump era, viewing technological leadership in this sector as crucial to national security and economic competitiveness. SMIC’s breakthrough suggests that while such controls may slow technological development, they cannot completely prevent it when faced with determined national efforts.
Technical Challenges and Production Realities
Despite the headlines, important technical nuances must be considered when evaluating SMIC’s achievement. The semiconductor industry’s node naming conventions (such as “5nm”) have become increasingly disconnected from actual physical dimensions. What matters more are the finished chips' performance characteristics, power efficiency, and transistor density.
While reported as equivalent to 5nm, SMIC's process likely differs significantly from TSMC’s or Samsung’s approaches. Industry analysts suggest the performance and efficiency may be closer to what these companies achieved with their early 7nm nodes. Additionally, manufacturing yields—the percentage of functional chips produced—remain unknown but are likely lower than those achieved by more established processes.
Production economics also presents challenges. Without EUV lithography, SMIC must use multiple patterning techniques, requiring more manufacturing steps, equipment, and time. This translates to higher production costs and potentially lower output capacity. These factors may limit the commercial viability of SMIC’s process for all but the most strategically important applications, where cost is secondary to availability.
Future Challenges and Sustainability
Despite this achievement, SMIC and China’s semiconductor industry face considerable challenges. The reported 5nm process likely remains less efficient than global leaders, with potentially lower yields and higher costs. Without access to EUV lithography, advancing to even smaller nodes (3nm and beyond) will become increasingly complex.
Maintaining and scaling this technology will also present challenges. The semiconductor industry typically relies on a global equipment, materials, and intellectual property ecosystem. While China has made strides in developing domestic alternatives, complete self-sufficiency remains elusive.
Additionally, the U.S. and its allies may respond with further restrictions or by targeting other vulnerable points in China’s semiconductor supply chain. The U.S. has already signaled that it is considering additional measures to address what it sees as circumvention of existing controls.
Looking ahead, China’s semiconductor strategy appears to evolve toward a dual approach: continuing to push the technological frontier with companies like SMIC while simultaneously developing innovative chip designs that maximize performance at more mature manufacturing nodes. This pragmatic approach recognizes the importance of cutting-edge technology and the practical limitations imposed by current geopolitical realities.
In the long term, this development may accelerate the fragmentation of global technology ecosystems into competing spheres of influence, with significant implications for global innovation, economic efficiency, and international relations in the decades to come.