The Chinese government has invested a significant sum of money in the largest local chip manufacturer Semiconductor Manufacturing International Corporation (SMIC). An investment of $2.2 billion was allocated shortly after the reports that Taiwan Semiconductor Manufacturing Company (TSMC) would stop accepting new orders from Huawei appeared.
Last Friday, the U.S. Department of Commerce announced measures restricting Huawei's ability to use U.S. technology and software to design and manufacture its semiconductors overseas.
According to a statement from the U.S. Department of Commerce, non-U.S. chip manufacturers who rely on U.S. manufacturing equipment, intellectual property, or software must apply for an export license to sell their products to Huawei or its 114 subsidiaries. TSMC recently announced plans to build the plant in Arizona that will manufacture chips according to 5-nanometer process standards. However, it is likely that the plant will not be enough to convince the United States to grant TSMC a license to trade with Huawei.
Huawei has already placed a large order of chips from SMIC according to the norms of a 14-nanometer process.
Termination of cooperation between Huawei and TSMC is equally disadvantageous for both companies. Huawei is losing access to the manufacturing facilities of a major manufacturer. Also, Huawei is TSMC's second-largest customer after Apple. Thus, TSMC will lose a large client that used to bring a stable income, approximately 15-20% of annual revenue.
As for SMIC, about 20% of its revenue comes from Huawei orders. Now, they can expect a significant increase in income.