Huawei's new smartphone uses more China-made parts than previous models

The Ottawa-based firm has since last weekend been examining parts of Huawei's Mate 60 Pro

SHANGHAI (Reuters) - Huawei Technologies' new high-end smartphone contains more China-made chip components than previous models in a sign of Beijing's advances in the semiconductor sphere, according to research firm TechInsights, which is taking the device apart.

"It looks like more than half, maybe two-thirds of the silicon is domestically grown capability, where in the phones we were seeing 2-3 years ago, a third was domestic. That's another really big advance they've made," Dan Hutcheson, an analyst with TechInsights, told Reuters.

The Ottawa-based firm has since last weekend been examining parts of Huawei's Mate 60 Pro and said earlier that the phone is powered by a new advanced chip that China's top contract chipmaker SMIC (0981.HK) manufactured using an advanced 7 nanometre (nm) technology, a breakthrough for the duo hit by U.S. sanctions.

"The significance is that it shows that China has been able to stay 2-2.5 nodes behind the world's best (chip) companies. People thought they would be stopped at 14 nanometer," Hutcheson said.

Analysts have been speculating over how costly it has been for Huawei to achieve the breakthrough, revealed last week during U.S. Commerce Secretary Gina Raimondo's visit to China, and what the chip's production yield could be, which refers to the number of usable chips from each wafer and affects production costs.

Some research firms forecast SMIC's 7 nm process has a yield rate below 50%, versus the industry norm of 90% or more, and the low yield would limit shipments to around 2-4 million chips, not enough for Huawei to regain its former smartphone market dominance.

Hutcheson, however, said "above 50%" was reasonable in his view, saying the chip was made in a far cleaner fashion and was much more competent than an earlier iteration of a 7 nm chip also made by SMIC that TechInsights examined last year.

"You can tell by how well it's made," he said. "China's been buying tools like crazy so they probably have the capability to do this and yield ok with it."

Huawei and SMIC did not immediately respond to requests for comment.

Huawei's smartphone business was decimated after the U.S. started restricting tech exports to the company in 2019 and analysts say the phone could mark a first step in the company's efforts to come back to rival Apple (AAPL.O).

Some early users of the phone have also posted videos of the phone containing NAND flash memory chips made by South Korea's SK Hynix Inc (000660.KS), which voluntarily suspended chip sales to Huawei after the Chinese firm was hit by Washington's sanctions.

"SK Hynix no longer does business with Huawei since the introduction of the U.S. restrictions against the company and with regard to the issue we started an investigation to find out more details," the company said in a statement.

"SK Hynix is strictly abiding by the U.S. government's export restrictions."