This Chinese chip firm is surviving US sanctions by focusing on mature tech

Unisoc, a Shanghai-based fabless chip firm that is expanding its market share in low-end smartphone chips, is one example of how Chinese semiconductor companies can survive and perhaps even thrive under US trade sanctions.

At the company’s 2,200 square meter exhibition hall in the Zhangjiang hi-tech zone, recently visited by the South China Morning Post, Unisoc showcases its achievements, including the tech team assembled during Covid lockdowns last year that designs its 5G chips.

More than 200 engineers slept at the office for nearly three months to make the chip possible, according to a company representative, and a group photo celebrates their efforts. “There’s no superhero, just the shining [example] of many people [working] together,” according to an inscription above the photo.

The company later pushed the chip – the T820 – to market in November 2022. Unisoc subsequently launched a 5G communication solution at Mobile World Conference 2023 in Barcelona in March.

Although the US is continuing to restrict exports of advanced chips and equipment to China on national security grounds, there is still life in the domestic semiconductor industry – especially the section that focuses on more mature chip technologies.

China had 3,243 chip design firms by the end of 2022, an increase of 15 per cent from a year ago, and their combined sales were up 16 per cent in 2022, according to China’s chip design industry association.

Unisoc is a leading designer of communication chips. According to market research firm Counterpoint, Unisoc’s share of the global smartphone chip market was 10 per cent in the third quarter of 2022, behind Taiwan’s Mediatek, US giants Qualcomm and Apple but ahead of Samsung Electronics.

Counterpoint analyst Bai Shenghao said in an interview with the Post that Unisoc remains relatively unscathed by US sanctions to date due to its focus on less advanced chips.

Nevertheless, Bai warned that the company faces risks due to weak consumer spending, particularly for low- and entry-level smartphones, amid global economic headwinds.

According to company information, Unisoc’s business covers more than 133 countries, and 80 per cent of its products are sold to overseas markets. Privately-owned Unisoc is conducting a new 10 billion yuan (US$1.45 billion) fundraising round, Reuters reported last month.

Of Unisoc’s 5,000 employees, 90 per cent are focused on research and development, which is “at the core” of the company’s capabilities, a company official said at the exhibition.

A subsidiary of Chinese state-backed semiconductor conglomerate Tsinghua Unigroup, Unisoc achieved a 20 per cent year-on-year increase in revenue to 14 billion yuan last year.

However, despite its 5G success, Unisoc remains exposed to US sanctions because China still lacks advanced fabrication plants of its own.
For example HiSilicon, the chip design unit of Huawei Technologies Co, was hobbled by US trade sanctions on exports of advanced chips – a move that meant leading global foundry Taiwan Semiconductor Manufacturing Co was required to stop doing business with it.

Unisoc last year launched three 5G chips using a 6-nanometre extreme ultraviolet lithography process, including the newly released T820. The company has not elaborated on plans for mass production of the chips.

The other two chips, the T760 and T770, have achieved mass production and have been adopted by China’s low-end smartphone brands, such as China Telecom, ZTE and HiSense.

Unisoc has also ramped up efforts to diversify its operations to mitigate potential risks.

This includes extending the application of 5G chips beyond consumer electronic products to industrial solutions such as medical services, logistics, electricity, mining, among others. The company’s shipments of 5G Internet of Things (IoT) chips and modules also increased 146 per cent last year. South China Morning Post