China may be making more advanced chips despite U.S. sanctions — but it still faces big problems

China's biggest chipmaker SMIC seems to have been manufacturing advanced chips in the last few months — defying U.S. sanctions designed to slow down Beijing's progress.

But there are still some major challenges to China's bid to become more self-sufficient in the semiconductor industry, with questions swirling around the long-term viability of its latest advancements.

Last year, U.S.-sanctioned Chinese tech giant Huawei launched the Mate 60, a smartphone with 5G connectivity and a chip, manufactured by Semiconductor Manufacturing International Co., using a 7 nanometer process.

SMIC is China's biggest contract semiconductor manufacturer. The nanometer figure refers to the size of each individual transistor on a chip. The smaller the transistor, the more of them can be packed onto a single semiconductor. Typically, a reduction in nanometer size can yield more powerful and efficient chips.

The 7 nanometer process is seen as highly advanced in the world of semiconductors, even though it isn't the latest technology.

It was a big deal at the time. But last week, the Financial Times reported that SMIC is setting up new production lines to make 5 nanometer chips for Huawei. That would signal even further advancement for China's biggest chipmaker.

The chips in Apple's latest high-end iPhones are made on a 3 nanometer process.

U.S. sanctions have been designed to slow China's ability to make the world's most advanced chips as technological competition between the two nations continues to heat up.

The company was put on a U.S. trade blacklist called the Entity List in 2020, which has cut SMIC off from key foreign technology that would allow it to make more advanced chips.

In October last year, the U.S. tightened restrictions to prevent the