Huawei made waves across China’s social media and markets following an unusually quiet launch on Aug. 29 of a new smartphone — Mate 60 Pro — featuring Huawei’s in-house Kirin chip. Given Huawei’s previous history of not having access to advanced chips due to U.S. sanctions, the fact that a Chinese firm has become more self-dependent regarding advanced chip-making sparked a lot of excitement.
Although Huawei remains tight-lipped about the chip processors and its foundry manufacturer, smartphone shop owners and online influencers rushed to unbox and tear down the product. Almost every mainstream media that covers China reported the news with extensive follow-ups, all wanting to find out the answers to one core question, as Reuters put in this headline:
The news even made some in the local crypto community excited. Chinese crypto media outlet Techflow went as far as to claim that bitcoin mining is the main force speeding up Huawei’s Kirin chip comeback citing partnerships between bitcoin miner manufacturers and Huawei’s unspoken foundry in China: Semiconductor Manufacturing International Corporation, or SMIC.
That narrative, which may or may not be true, is an interesting one to explore deeper. Although there is no way to confirm the claim unless Huawei and SMIC go public with it, it is worth pointing out some interesting dots that can be connected.
Bypassing the U.S. curb
The U.S. government put Huawei on an Entity List in May 2019, cutting off its access to the global supply chain for making advanced chips. Effectively, Huawei’s chip design arm HiSilicon could no longer rely on TSMC to manufacture its flagship Kirin chips. As of then, there were no equivalent fab alternatives inside China since SMIC was nowhere close to being able to produce 7-nm chips.
More than four years after the sanction, Huawei released the Mate 60 Pro without officially disclosing whether the core inside is its flagship Kirin chips, or where the chip was even manufactured.
One Chinese independent gadget review site published an unboxing video of a new Mate 60 Pro and found it was indeed a 5G smartphone that was powered by a Kirin chip made by HiSilicon, with a label that indicates the manufacturing place to be CN (Mainland China). Before the U.S. sanctions, HiSilicon chips would have TW for Taiwan printed on them.
In July, Reuters reported that Huawei was plotting a comeback this year with a new 5G smartphone and cited industry sources who said SMIC will be the foundry fab for the smartphone with its N+1 technology, which is loosely considered as a 7-nm process.
Semiconductor research firm TechInsights confirmed on Sept. 5 based on its lab work that the Mate 60 Pro smartphone does use chips based on SMIC’s N+2 7-nm process, which is the second generation after its N+1 7-nm chip that only started production in March 2020.
So what does bitcoin mining have anything to do with all this? SMIC couldn’t start making high-quality N+1 overnight, nor could it advance the process to N+2 without solid groundwork for N+1 to begin with. It takes time and a sufficient number of wafer orders for a semiconductor fab to hone and perfect a new chip processor product line. For what it is worth, bitcoin mining hardware makers were among the first batch of customers to have tested bitcoin ASICs on SMIC’s N+1 process and increased order volume.
SMIC only started the N+1 production in March 2020, soon before the global chip shortage began to show effect. On Aug. 31 that year, Canaan’s chairman Nangeng Zhang confirmed in an earnings call their successful tape-out on SMIC’s first-generation N+1 chip, adding that it was “one of the first N+1 chips to have a successful tape-out at SMIC.”
“In late August, we have already received the N+1 chip from SMIC and its performance during the test has exceeded our expectations,” he said. A month later in September 2020, Canaan rolled out the Avalon 1246 model based on the N+1 chip technology. It revealed in the 2020 annual report that SMIC accounted for 22.7% of its total wafer procurement that year.
Also interesting is that Canaan sold 22.34 EH/s of computing power in 2021, and almost all of that came from the A1246 model, suggesting its wafer procurement from SMIC must have jumped up significantly in the bull year. The increasing volume of wafer orders also appeared to have helped Canaan and SMIC to improve the yield rate of A1246 to over 90%, according to Zhang in a September 2021 earnings call.
One could argue that these wafer orders helped SMIC in maturing the N+1 chip technology, which is crucial to Huawei’s Kirin comeback this year, although it is hard to determine the extent of that contribution. Techflow cited a screenshot of what appears to be a 2021 earnings call transcript written in Chinese where Canaan said SMIC allocated them 95% of its N+1 wafer capacity. TheMinerMag has not been able to verify that claim in any of the quarterly earnings call transcripts posted online from 2020 to 2022.
Canaan was not the only company that tested at SMIC. In December 2020, it was reported that InnoSilicon also completed a tape-out on SMIC’s N+1 technology although it wasn’t clear whether it was a bitcoin ASIC chip. InnoSilicon is a contract ASIC designer in China and has made several popular bitcoin ASIC miners in the past.
In 2021, a Canada-based manufacturer called MinerVA came to the market, boasting bulk purchase orders of over 50,000 of its MinerVA miners from Stronghold Digital and Terawulf. It later became clear that MinerVA was working with another Chinese company called AGM Holdings to make the miners also based on SMIC’s N+1 technology.
Although those purchase orders for MinerVA machines did not work out as intended in terms of performance and delivery schedule, TechInsights did find SMIC’s N+1 7-nm chips inside the MinerVA7 model. At the time, TechInsights said the process was the most advanced technology product from SMIC seen by the research firm, adding:
It also has key implications for Chinese chip companies, as it helps to reduce China’s reliance on Western technologies during this time of restricted access.