To counter U.S. sanctions that have slowed sales of semiconductors in China, a top executive at Huawei said Friday that the country's semiconductor industry will be "reborn" following U.S. sanctions. In reaction to Washington's tech export restrictions on China, Huawei's rotating chairman, Eric Xu, issued some tough words.

Based on the views of the founder of Advanced Micro-Fabrication Equipment (AMEC), one of China's leading manufacturers of etching equipment, the restrictions placed by the US on the import of those products will only have a negligible impact on the ability of his company to operate.

In a more specific sense, Gerald Yin stated that by the end of the year, domestic alternatives will be capable of replacing approximately 80% of imported (and now restricted) equipment. A lot of analysts estimate that AMEC could resume full operational capacity by 2024 - a result of China's billion-yuan drive to attain semiconductor self-sufficiency by the second half of that year. 

AMC is expecting to achieve a 60% market share in the capacitively coupled plasma (CCP) electrode etching equipment market within a few quarters, an increase of a significant proportion compared with its 25% market share as of the end of October 2022. Aside from this market, the company is looking to encroach on the segment for inductively coupled plasma (ICP) tools - and seeks to control three-quarters of this market almost with the same speed. 

Amid AMEC growing its share, Lam Research, which is based in the US and recently presented a possible 3D DRAM design, is shrinking. Lam Research is one of the companies that has recently made headlines. AMEC's ability to grab such a significant share of the Chinese market from such a company is perhaps telling - either the Chinese market is deceptively advanced, or Lam Research has been deprived of the opportunity to sell its products on the Chinese market as a result of being restricted.  

In the broader fight between the U.S. and China for technological supremacy, semiconductors have been a flash point. With sanctions and export restrictions, Washington has attempted to isolate China and Chinese companies over the past few years, using various methods to isolate them. It was announced in February 2019 that Huawei had been placed on the U.S. Entity List, which prohibits American companies from dealing with the Chinese company when it comes to selling technology to them. 

In particular, those chips are used in 5G - where 5G refers to the super-fast network of next-generation mobile phones. As a result of the tightening of chip restrictions against Huawei in 2020, it was effectively deprived of the latest cutting-edge chips that it needed to manufacture smartphones of the highest quality. 

To safeguard the interests of Chinese companies, Washington placed broader chip import restrictions last year, preventing them from gaining access to semiconductors that are critical to the development of artificial intelligence and other advanced applications. China is rumored to be interested in using advanced semiconductors for military purposes, a situation that concerns the U.S. In his statement, Huawei’s Xu explained that these developments could benefit Chinese semiconductor manufacturers rather than hinder them. 

China has stepped up its efforts for a more independent chip sector nearly seven months after the US government imposed trade barriers on it. Despite the withdrawal of Western technology and money, state funding is flooding in to cultivate homegrown alternatives that can produce semiconductors that are less sophisticated, but are nonetheless lucrative. 

It is important to note that China has not given up on making high-end chips even though U.S. sanctions have been imposed on old foreign parts and equipment in the country. Manufacturers are attempting to work with less advanced equipment at home as well as older parts from abroad. CNBC previously reported that analysts said that the latest round of U.S. sanctions against China's semiconductor industry is likely to cause the industry to suffer. 

A few tools or chips that have been manufactured using American technology are currently forbidden from being exported to China under the current rules. Chip supply chains are very effective because of the nature of their supply chains. Although semiconductors are manufactured in a variety of countries around the world, U.S. tools are still used throughout the process of chip production. 

A major part of China's chip industry is dependent on foreign technology, and the country does not have as many companies as the U.S., Taiwan, Japan, and South Korea that can compete with their companies. As part of the fight with the U.S. over technology, China has made the concept of self-reliance a vital priority. However, experts agree that this mission will prove extremely problematic for the country. 

The Chinese government is now increasing its efforts to build a domestic semiconductor industry by developing the tools needed.  According to Chinese media last week, Xu made a statement saying that Huawei has collaborated with other local firms in creating a toolkit necessary to create semiconductors having a size of 14 nanometers or more as a part of a joint effort to develop electronic chip design tools. 

According to Xu, those tools are expected to be verified by the end of the year, which will enable them to go into operation. It has been confirmed by the rotating chairman that this speech had been given, but he added that these tools will "really mean very little" for Huawei's business in the future.

In other words, Chinese firms have access to the design tools that they need to develop products for their local markets. Specifically, 14 nanometers are a measurement of the size of each transistor on a chip, which is measured in nanometers. Smaller semiconductors are capable of holding more transistors so more transistors can be crammed into the same semiconductors. 

There are usually more powerful and more efficient chips as a result of cutting down the nanometer size. For more advanced applications, Huawei, however, is facing a lot of difficulty obtaining chips that are much smaller than nanometers in size, which makes it very challenging for them to deliver higher performance. In 2022, the company suffered the greatest decline in net profit during a single year ever in its history, as a result of U.S. sanctions, according to the company's announcement on Friday.