Apple Faces Growing Threat from Resurgent Huawei Amid Semiconductor Breakthrough

Apple Inc AAPL is encountering several challenges in China, with geopolitical tensions and economic uncertainties. 

However, analysts believe the most significant threat may come from a resurgent Huawei Technologies Co, Ltd, thanks to a major semiconductor breakthrough that defies U.S. sanctions.

The latest chip produced by China's largest semiconductor maker SMIC has raised concerns in Washington about how Huawei developed this technology without access to critical components due to sanctions, CNBC reports.

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Huawei has faced allegations of national security risks for years due to its supposed ties to the Chinese Communist Party and the military. 

In 2019, the U.S. imposed sanctions that severed Huawei's access to critical technologies, severely impacting its smartphone business. Huawei's chips, previously manufactured by Taiwan Semiconductor Manufacturing Company Ltd TSM, were no longer accessible due to U.S. export restrictions.

However, a recent surprise came when Huawei released the Mate 60 Pro in China, featuring a chip made by SMIC, a company also on the U.S. Entity List, raising questions about how Huawei achieved this with substantial sanctions on itself and SMIC.

The new chip, the Kirin 9000S, is manufactured using a 7-nm process by SMIC, a significant milestone for China's semiconductor industry. 

The smaller the nanometer size, the more powerful and efficient the chip. While SMIC's achievement is noteworthy, it remains unclear how efficient and profitable this process is on a large scale, particularly regarding chip yield.

The U.S. Department of Commerce has expressed interest in Huawei's chip, prompting concerns in Washington and potential further export restrictions. 

As geopolitical tensions continue, the possibility of Huawei's resurgence poses the most significant threat to Apple in China.

Price Action: AAPL shares traded higher by 0.29% at $178.49 premarket on the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.