Huawei Secretly Building Chip Network to Skirt US Sanctions

A Washington-based semiconductor association has warned that Huawei is building a collection of secret semiconductor-fabrication facilities across China that would let it skirt U.S. sanctions. The Chinese tech giant moved into chip production last year and is receiving an estimated $30 billion in state funding from the government for its efforts, the Semiconductor Industry Association said, adding that Huawei has acquired at least two existing plants and is constructing three more. The move may help the company evade tightening sanctions against it that have raised suspicions that Beijing is trying to leverage its dominance in telecommunications gear to gain a foothold in other technology sectors and further its ambitions.

The United States has placed Shenzhen-based Huawei on a trade blocklist that bars most suppliers from providing equipment and technology to the company unless they have a license from Washington. The restrictions have mainly frozen the company out of getting some of the computer chips integral to making equipment for new high-speed wireless networks. That has stoked concerns that the Chinese government could use the technology to spy on foreign governments, companies, and individuals.

On Friday, the Commerce Department extended a temporary license, allowing telecommunications providers to continue working with Huawei for another month. The department said in a statement that the extension was needed to ensure that the U.S. can keep a crucial communication infrastructure up and running.

But the latest development is likely to heighten tensions between Washington and China as both nations seek to maintain their technological supremacy. In an age of escalating global conflict, issues related to technology dominance are increasingly central. The alleged effort by Huawei to bypass sanctions with this shadow manufacturing network will raise suspicions that the Chinese government is playing a more significant role in the company than it has let on in the past, further fueling fears of espionage and the potential for a digital iron curtain.

Chips are critical to a vast swath of the company’s products, from the base stations required for 5G networks to smartphones. The company designs the semiconductors for its products via a division called HiSilicon, but it uses Taiwan’s TSMC to manufacture them. TSMC is among the companies that could be hardest hit by the new U.S. rules, giving the government full global authority in interpreting what chip items can be sold to Huawei.

According to a recent report by Counterpoint Research, Shenzhen-based Huawei has now run out of the in-house-designed chips it needs for its smartphones. That’s because the firm has yet to be able to source any new US-made ones since Washington imposed new trade restrictions on it and its chip design arm, HiSilicon, in August 2020.