Necessity Is The Mother Of Invention: China Knows It Better | The Reason Why

When the West united against China's rise, it imposed sanctions and export restrictions in hopes that China would continue to depend on Western technologies. But China didn't crib and fall in line. It turned this disadvantage into a catalyst for innovation. It accelerated reforms, doubled down on its manufacturing capacities, incentivised R&D and reduced external dependence. Huawei's latest breakthrough in chip technology is a testament to this temperament.

Huawei's Bitter History With the US

Huawei began as a telecom equipment maker before expanding into smartphones, chips and EVs. Its global rise was aided by strong state support.

US concerns about Huawei date back to the early 2000s and intensified over its activities in countries such as Iran. By 2012, Washington had labelled Huawei and ZTE national security risks, while Australia banned both from its 5G network in 2018. Reports linking Huawei to surveillance systems in Xinjiang and data-security concerns abroad further deepened suspicion.

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The real blow came in 2019 when the Trump administration blacklisted Huawei, cutting off access to key American technology. Huawei lost access to advanced chips from TSMC, AI chips from Nvidia and EUV lithography machines from ASML.

Meanwhile, Huawei CFO Meng Wanzhou, daughter of founder Ren Zhengfei, was detained in Canada in 2018 over alleged Iran sanctions violations. After nearly three years under house arrest, she was released in 2021, and the charges were dropped in 2022.

Huawei Roared Back

Huawei responded to US sanctions by investing heavily across China's semiconductor ecosystem. It deployed task forces and built R&D centres to reduce supply chain bottlenecks and dependence on foreign technology. The results have been striking.

In 2023, Huawei unveiled the Mate 60 Pro with an advanced Chinese-made processor. Then came HarmonyOS Next, a fully in-house operating system rivalling Android, and later, AI chips as alternatives to Nvidia GPUs.

Tau Scaling Technology

For decades, we have been making transistors smaller and packing more of them onto a chip. That was Moore's Law. But Huawei is choosing a different path as it cannot access ASML's most advanced lithography tools. It's the Tau Scaling Law. It argues that the real bottleneck is no longer transistor size, but the time it takes signals to travel within a chip.

To solve this, Huawei uses a technique called LogicFolding, which stacks circuits vertically instead of spreading them across a flat surface. This reduces wiring distances, allowing data to move faster and more efficiently.

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Huawei claims the approach has increased transistor density by 55% and improved power efficiency by 41%. The company believes it can eventually achieve 1.4nm-equivalent chip density through this method.

Criticism of Tau Scaling Technology

However, here's what critics have cautioned:

• There is no independent performance study provided, and thus it could be an overstatement.
• A folded 7nm chip is still fundamentally a 7nm chip.
• Rivals like TSMC are advancing toward true 1.4nm before Huawei.
• Huawei's software ecosystem is still less mature than Nvidia's CUDA platform.
• The new tech could create heat-management challenges.
• The current Ascent chips have components from sanctioned entities, raising supply chain sustainability issues.

Doubling Down on Innovation: China's Old Way of Sanctions Management

Breakthroughs like these have fuelled debate over whether technology restrictions have accelerated, rather than slowed, China's innovation. As China's Foreign Minister Wang Yi put it: "Where there is a blockade, there are breakthroughs; where there is suppression, there is innovation." A growing body of research supports this statement.

A 2025 Harvard Business School working paper examined the impact of the 2007 US export restrictions on certain dual-use technologies with military applications. The researchers found that affected Chinese firms increased R&D spending by 49%, patenting by 41%, and the number of active inventors by 30%.

A separate study led by Professor Liu Lanjian of Changan University reached similar conclusions. It studied nearly 1,000 Chinese high-tech firms between 2010 and 2020 affected by the US sanctions. The study found higher R&D spending and patent filings, but also a 40% rise in costs due to reliance on indigenous technologies.

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Final Take

Whether Huawei is better than Nvidia or TSMC is not really the point. The bigger question is whether sanctions can prevent China from catching up technologically. The real test is not whether China can overtake the West tomorrow, but whether it can steadily narrow the gap and become increasingly self-reliant over time.

Sanctions may slow China's progress in the short run. They can make developing indigenous technologies expensive, but they also create powerful incentives for self-reliance. Chinese firms are investing aggressively in domestic research, talent and innovation.

Until now, we have seen that restrictions designed to contain its technological rise have, paradoxically, helped accelerate it.

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