semiconductor

US said to weigh sanctions against Huawei’s secretive chip supply network

desk 20 March 2024

No final decisions have been made, the people said. Bloomberg News first reported about SIA’s presentation in 2023.

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Such a move by the US government would mark another escalation in Washington’s campaign to ringfence and curtail Beijing’s artificial intelligence and semiconductor ambitions.

It would also ratchet up the pressure on Huawei, which introduced an advanced 5G smartphone processor last year that many in Washington thought beyond its capabilities.

“Adding more Chinese companies to the US Entity List is a highly likely event,” Jefferies analyst Edison Lee wrote after CXMT was identified as a potential target. “It is easy to implement and justify, and it will further block certain key Chinese companies from being able to exploit current loopholes in export restrictions.”

Beyond companies that actually produce chips, US officials may also sanction Shenzhen Pengjin High-Tech Co, according to the people, as well as SiCarrier, one of the people said. The concern is that those two firms, which make chip-manufacturing gear, are acting as proxies to help Huawei obtain restricted equipment, according to the person.

Adding more Chinese companies to the US Entity List is expected to block certain key mainland entities from being able to exploit current loopholes in semiconductor tech export restrictions. Photo: Shutterstock

It is not clear whether the US Commerce Department, which administers the trade blacklist, has additional evidence linking the companies to Huawei, the people said. The US has the authority to sanction businesses that are at risk of harming its national security in the future, and officials do not necessarily need to prove past harmful or illegal activity.

The White House’s National Security Council and Commerce Department’s Bureau of Industry and Security (BIS) declined to comment.

Representatives for the individual Chinese companies and the Ministry of Commerce did not respond to messages seeking comment.

The Ministry of Foreign Affairs reiterated that it “resolutely opposes” US actions that disrupt market order and harms Chinese enterprises, but did not comment specifically on the potential US moves under deliberation.

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It is uncertain when US officials will make a final decision, the people said, emphasising that timing will likely depend on the status of relations between Washington and Beijing – which both sides have worked to improve in recent months. Treasury Secretary Janet Yellen is expected to visit China again in 2024, and top officials have discussed a phone call between President Joe Biden and Chinese leader Xi Jinping sometime this spring.

There are also other policy considerations, such as when the White House will announce a long-awaited adjustment of sweeping China tariffs first imposed under former President Donald Trump. Officials are also considering raising duties on older-generation chips from China, according to people familiar with the matter who said those conversations have picked up in recent weeks.

Huawei was added to the Entity List in 2019, which barred the company from purchasing American technology unless US suppliers obtain a special export licence from the Commerce Department.

While those sanctions kneecapped Huawei’s smartphone business for years, the company unveiled in August its 5G Mate 60 Pro smartphone powered by a 7-nanometer chip made in China – and began selling the handset while Commerce Secretary Gina Raimondo was visiting the country.

Huawei’s China-made chip used US gear from Applied Materials and Lam Research

The use of those chip-making equipment, which were bought before US and Dutch export controls went into effect, indicates that China still cannot entirely replace foreign components even as Beijing tries to build a full domestic semiconductor supply chain.