According to a report produced by semiconductor industry analysts at Kiwoom Securities—a South Korean financial services firm—Semiconductor Manufacturing International Corporation (SMIC) is expected to complete the development of a 5 nm process at some point in 2025. Jukanlosreve summarized this projection in a recent social media post. SMIC is often considered to be China's flagship foundry business; the partially state-owned organization seems to heavily involved in the production of (rumored) next-gen Huawei Ascend 910 AI accelerators. SMIC foundry employees have reportedly struggled to break beyond a 7 nm manufacturing barrier, due to lack of readily accessible cutting-edge EUV equipment. As covered on TechPowerUp last month, leading lights within China's semiconductor industry are (allegedly) developing lithography solutions for cutting-edge 5 nm and 3 nm wafer production.

Huawei is reportedly evaluating an in-house developed laser-induced discharge plasma (LDP)-based machine, but finalized equipment will not be ready until 2026—at least for mass production purposes. Jukanlosreve's short interpretation of Kiwoom's report reads as follows: (SMIC) achieved mass production of the 7 nm (N+2) process without EUV and completed the development of the 5 nm process to support the mass production of the Huawei Ascend 910C. The cost of SMIC's 5 nm process is 40-50% higher than TSMC's, and its yield is roughly one-third." The nation's foundries are reliant on older ASML equipment, thus are unable to produce products that can compete with the advanced (volume and quality) output of "global" TSMC and Samsung chip manufacturing facilities. The fresh unveiling of SiCarrier's Color Mountain series has signalled a promising new era for China's foundry industry.

According to a recent Center for Strategic and International Studies report, Huawei got its hand on approximately two million Ascend 910B logic dies through shell companies that misled TSMC. This acquisition violates US export controls designed to restrict China's access to advanced semiconductor technology. The report details how Huawei leveraged intermediaries to procure chiplets for its AI accelerators before TSMC discovered the deception and halted shipments. These components are critical for Huawei's AI hardware roadmap, which progressed from the original Ascend 910 (manufactured by TSMC on N7+ until 2020) to the domestically produced Ascend 910B and 910C chips fabricated at SMIC using first and second-generation 7 nm-class technologies, respectively. Huawei reportedly wanted TSMC-made dies because of manufacturing challenges in domestic chip production. The Ascend 910B and 910C reportedly suffer from poor yields, with approximately 25% of units failing during the advanced packaging process that combines compute dies with HBM memory.

Despite these challenges, the performance gap with market-leading solutions still remains but has narrowed considerably, with the Ascend 910C reportedly delivering 60% of NVIDIA H100's performance. Huawei has executed a strategic stockpiling initiative, particularly for high-bandwidth memory components. The company likely acquired substantial HBM inventory between August and December 2024, when restrictions on advanced memory sales to China were announced but not yet implemented. The semiconductor supply chain breach shows that enforcing technology export controls is challenging, and third parties can still purchase silicon for restricted companies. While Huawei continues building AI infrastructure for both internal projects and external customers, manufacturing constraints may limit its ability to scale deployments against competitors with access to more advanced manufacturing processes. Perhaps a future domestic EUV-based silicon manufacturing flow will allow Huawei to gain access to more advanced domestic production, completely circumventing US-imposed restrictions.

Huawei is likely celebrating milestones on multiple fronts—as reported earlier this month, the Chinese technology manufacture has pulled in record revenues and experienced consistent growth. Additionally, industry insiders believe that things are going well within the company's production pipeline. According to a Financial Times report, Huawei's next-generation AI accelerator model is on the way—the unannounced "Ascend 910C" is touted to directly compete with NVIDIA's H100 AI GPU. Industry moles believe that Huawei has partnered with SMIC for the manufacture of in-house accelerator designs. Whispers suggest a selection of the foundry's 7 nm N+2 process.

The alleged doubling of production yields (within a year)—from 20% to 40%—signals a significant achievement. As reported by FT, this milestone indicates Huawei's Ascend chip production line becoming profitable for the very first time. Two inside sources propose that Huawei and SMIC are targeting a 60% yield goal in the near future. In 2025, leaked plans suggest production tallies of roughly 100,00 Ascend 910C processors, and 300,000 of the current-gen Ascend 910B chip.

Huawei Technologies reported a robust 22% year-over-year revenue increase for 2024, reaching 860 billion yuan ($118.27 billion), demonstrating remarkable resilience amid continued US-imposed trade restrictions. The Chinese tech giant's resurgence was primarily driven by its revitalized smartphone division, which captured 16% of China's domestic market share, overtaking Apple in regional sales. This achievement was notably accomplished by deploying domestically produced chipsets, marking a significant milestone for the company. In collaboration with Chinese SMIC, Huawei delivers in-house silicon solutions to integrate with HarmonyOS for complete vertical integration. The company's strategic diversification into automotive technology has emerged as a crucial growth vector, with its smart car solutions unit delivering autonomous driving software and specialized chips to Chinese EV manufacturers.

In parallel, Huawei's Ascend AI 910B/C platform recently announced compatibility with DeepSeek's R1 large language model and announced availability on Chinese AI cloud providers like SiliconFlow. Through a strategic partnership with AI infrastructure startup SiliconFlow, Huawei is enhancing its Ascend cloud service capabilities, further strengthening its competitive position in the global AI hardware market despite ongoing international trade challenges. Even if the company can't compete on performance versus the latest solutions from NVIDIA and AMD due to the lack of advanced manufacturing required for AI accelerators, it can compete on costs and deliver solutions that are typically much more competitive with the price/performance ratio. Huawei's Ascend AI solutions deliver modest performance. Still, the pricing makes AI model inference very cheap, with API costs of around one Yaun per million input tokens and four Yuan per one million output tokens on DeepSeek R1.

Report with market evolution powered by AI—The global artificial intelligence (AI) chips market size is estimated to grow by USD 902.6 billion from 2025-2029, according to Technavio. The market is estimated to grow at a CAGR of over 81.2% during the forecast period. Increased focus on developing AI chips for smartphones is driving market growth, with a trend towards convergence of AI and IoT. However, dearth of technically skilled workers for ai chips development poses a challenge. Key market players include Advanced Micro Devices Inc., Baidu Inc., Broadcom Inc., Cerebras, Fujitsu Ltd., Google LLC, Graphcore Ltd., Huawei Technologies Co. Ltd., Intel Corp., International Business Machines Corp., MediaTek Inc., Microchip Technology Inc., NVIDIA Corp., NXP Semiconductors NV, Qualcomm Inc., SambaNova Systems Inc., Samsung Electronics Co. Ltd., SenseTime Group Inc., Taiwan Semiconductor Manufacturing Co. Ltd., and Tesla Inc.

When High-Flyer, the hedge fund behind DeepSeek, debuted its flagship model, DeepSeek R1, the tech world went downward. No one expected Chinese AI companies can produce high-quality AI model that rivals the best from OpenAI and Anthropic. While there are rumors that DeepSeek has access to 50,000 NVIDIA "Hopper" GPUs, including H100, H800, and H20, it seems like Huawei is ready to power Chinese AI infrastructure with its AI accelerators. According to the South China Morning Post, Chinese cloud providers like SiliconFlow.cn are offering DeepSeek AI models for inference on Huawei Ascend 910B accelerators. For the price of only one Yuan for one million input tokens, and four Yuan for one million output tokens, this economic model of AI hosting is fundamentally undercutting competition like US-based cloud providers that offer DeepSeek R1 for $7 per million tokens.

Not only is running on the Huawei Ascend 910B cheaper for cloud providers, but we also reported that it is cheaper for DeepSeek itself, which serves its chat app on the Huawei Ascend 910C. Using domestic accelerators lowers the total cost of ownership, with savings passed down to users. If Western clients prefer AI inference to be served by Western companies, they will have to pay a heftier price tag, often backed by the high prices of GPUs like NVIDIA H100, B100, and AMD Instinct MI300X.

Huawei's Ascend 910C AI chip was positioned as one of the better Chinese-developed alternatives to NVIDIA's H100 accelerator—reports from last autumn suggested that samples were being sent to highly important customers. The likes of Alibaba, Baidu, and Tencent have long relied on Team Green enterprise hardware for all manner of AI crunching, but trade sanctions have severely limited the supply and potency of Western-developed AI chips. NVIDIA's region-specific B20 "Blackwell" accelerator is due for release this year, but industry watchdogs reckon that the Ascend 910C AI GPU is a strong rival. The latest online rumblings have pointed to another major Huawei customer—DeepSeek—having Ascend silicon in their back pockets.

DeepSeek's recent unveiling of its R1 open-source large language model has disrupted international AI markets. A lot of press attention has focused on DeepSeek's CEO stating that his team can access up to 50,000 NVIDIA H100 GPUs, but many have not looked into the company's (alleged) pool of natively-made chips. Yesterday, Alexander Doria—an LLM enthusiast—shared an interesting insight: "I feel this should be a much bigger story—DeepSeek has trained on NVIDIA H800, but is running inference on the new home Chinese chips made by Huawei, the 910C." Experts believe that there will be a plentiful supply of Ascend 910C GPUs—estimates from last September posit that 70,000 chips (worth around $2 billion) were in the mass production pipeline. Additionally, industry whispers suggest that Huawei is already working on a—presumably, even more powerful—successor.

According to a recent Reuters report, TSMC has decided to cut off Chinese firm Sophgo following the discovery of TSMC-manufactured components in Huawei's advanced AI processor. The suspension came after technology research firm TechInsights identified a TSMC-manufactured chip within Huawei's Ascend 910B processor during a detailed analysis. This discovery raised significant concerns, as Huawei has been restricted from accessing such technology under US export controls since 2020. TSMC promptly notified US authorities upon learning of the situation and launched an internal investigation. While being sanctioned by the US, Huawei needed to use a proxy firm to get access to high-end silicon manufacturing to produce its Ascend accelerators.

Sophgo, which has ties to cryptocurrency mining equipment manufacturer Bitmain, strongly denies any business relationship with Huawei. The company states it has provided TSMC with a detailed investigation report asserting its compliance with all applicable laws, saying: "SOPHGO has never been engaged in any direct or indirect business relationship with Huawei. SOPHGO has been conducting business in strict compliance with applicable laws and regulations, including but not limited to all the applicable US national export control laws and regulations, and has never been in violation of any of such laws and regulations. SOPHGO has provided detailed investigation report to TSMC to prove that SOPHGO is not related to the Huawei investigation."