SHANGHAI/BEIJING, China: Huawei Technologies said on May 25 that it plans to produce semiconductors with transistor density equivalent to advanced 1.4-nanometre processes within five years, unveiling a new chip design approach aimed at overcoming U.S. sanctions and narrowing China's technology gap with global rivals.

The announcement, made during a semiconductor symposium in Shanghai, highlighted Beijing's push to build a self-sufficient chip industry despite restrictions on access to advanced Western semiconductor equipment.

Huawei said its future high-end chips could achieve performance levels comparable to 1.4-nm manufacturing processes by 2031, although the company did not provide independent benchmark data.

The target is significant because China's most advanced confirmed chipmaking capability is widely believed to remain around the 7-nm level, while global leaders are expected to approach 1.4-nm technology near the end of the decade.

Taiwan Semiconductor Manufacturing Co. currently uses 2-nm technology and plans to begin mass production of 1.4-nm chips in 2028.

Huawei's strategy relies on what it calls the "Tau Scaling Law," a new approach focused on improving system efficiency and reducing delays in the movement of data and signals through chips rather than relying primarily on shrinking transistor sizes.

The company said traditional transistor scaling, known as Moore's Law, is becoming increasingly difficult because transistors are now only a few atoms wide.

"What Huawei is proposing is a shift from traditional node-driven scaling to system-level efficiency scaling," said He Hui, director of semiconductor research at Omdia.

"Rather than depending solely on smaller transistors, the company is focusing on shortening interconnect, lowering latency, and improving data movement inside the chip, which is a credible way to extract more performance when leading-edge lithography is constrained," He added.

Huawei said its new LogicFolding architecture, based on Tau Scaling, will first be used in Kirin smartphone chips launching later this year. The company said the design shortens wiring inside chips and significantly improves performance.

The technology is also expected to be applied to Huawei's Ascend AI chips and large-scale artificial intelligence computing clusters by 2030.

The stakes for Huawei's semiconductor ambitions have risen as China increasingly views advanced computing and AI as critical to future economic growth and geopolitical competition.

Demand for Huawei's Ascend chips has grown rapidly in China as local companies search for alternatives to Nvidia products restricted by U.S. export controls.

Nvidia CEO Jensen Huang said earlier this month that the U.S. company had "largely conceded" China's AI chip market to Huawei.

Huawei was placed on a U.S. trade blacklist in 2019, cutting the company off from many American technologies and restricting access to global chip manufacturing partners.

The company described the years following the sanctions as an "extreme survival mode," with a backup semiconductor project led by He Tingbo, president of Huawei's semiconductor business, becoming central to its long-term strategy.

Huawei mounted a surprise recovery in 2023 with its 5G-capable Mate 60 smartphone series powered by chips produced by Semiconductor Manufacturing International Corp using 7-nm technology.

Following Huawei's latest announcement, SMIC shares rose 7.6 percent on May 25.

Analysts cautioned that significant technical challenges remain. "Cost, power, heat, and system integration remain major challenges, especially for Cloud AI servers," said Brady Wang, associate director at Counterpoint Research.

"In the short term, China may narrow the gap with global leaders, but a technology gap with the most advanced nodes will still remain," Wang added.

Huawei semiconductor executive He Tingbo also acknowledged obstacles ahead, including the need for new chip-design tools and the challenge of managing overheating in large AI systems.

"Given all the various constraints, we have found some pretty good solutions... I can confidently say in the coming 10 years our solutions for mobile computing and AI computing will be competitive," He said.