Huawei's Latest Smartphone Launch Sparks Concerns of US Sanction Evasion

The U.S. government has formally launched an investigation into the advanced Chinese-made chips found in Huawei's new mobile phones.
Huawei's Latest Smartphone Launch Sparks Concerns of US Sanction Evasion
A pedestrian talks on the phone while walking past a Huawei Technologies Co. store in Beijing on Jan. 29, 2019. (Kevin Frayer/Getty Images)
Lisa Bian

Huawei's recent launch of its latest smartphone, which uses an advanced 7-nanometer chip made in China and an unidentified South Korean chip, has raised questions about whether the regime in Beijing has breached U.S. sanctions.

The Chinese telecom equipment company unveiled its Mate 60 Pro smartphone in late August as U.S. Commerce Secretary Gina Raimondo wrapped up her visit to China.

The new Kirin 9000s chip used in the Mate 60 Pro is equipped with advanced 7-nanometer chips developed by Chinese company SMIC International. Although it hasn't reached the most advanced level, the Huawei Kirin 9000s chip's launch still raises questions about whether the Chinese Communist Party (CCP) has evaded U.S. sanctions.

Huawei was put on a U.S. trade control blacklist in 2019 and on the U.S. entity list in September 2020, making it no longer able to cooperate with TSMC to produce Kirin chips.

After the Mate 60 Pro was disassembled, a smartphone-specific LPDDR5 chip and NAND flash chip made by South Korean chip giant SK Hynix also were found. It also isn't clear how Huawei obtained the SK Hynix chips.

SK Hynix stated that after the United States imposed sanctions on Huawei, the company fully implemented the U.S. government’s export restrictions and has stopped doing business with Huawei. The company also stated that it has reported the incident to the Industrial Security Bureau under the Department of Commerce and has opened an investigation.

The U.S. government has begun a formal investigation into the advanced Chinese-made chips in Huawei's new mobile phones, while voices to tighten sanctions on Chinese chips have emerged in the U.S. Congress.
In order to evade U.S. sanctions in the semiconductor field, the CCP has used various tactics to secure semiconductor equipment.

Purchase of US Chip Equipment 

The Semiconductor Industry Association (SIA) warned in August that Huawei, which has been involved in wafer manufacturing since 2022, is purchasing U.S. semiconductor manufacturing equipment in the name of other companies and building a secret semiconductor manufacturing chain in China in order to sidestep Commerce Department sanctions.

SIA also revealed that Huawei has received about $30 billion in support from the CCP authorities, has acquired at least two existing factories to date, and is building a third.

That means that Huawei may have circumvented the U.S. restrictions by indirectly purchasing U.S. chipmaking equipment.

In addition, since the United States restricted the export of high-end computer chips in September 2022, black market outlets for chips—such as the Huaqiangbei electronics market in Shenzhen—have emerged in China. Black market suppliers are selling the A100 artificial intelligence chip made by Nvidia, a leading U.S. chipmaker, at double the original price.
According to Reuters, suppliers get the chips in two main ways. One is to snap up excess inventory that Nvidia has shipped in bulk to large U.S. companies; the other is to import them through local companies registered in Taiwan, Singapore, and India.
There also has been speculation that Beijing might have imported U.S.-controlled semiconductor equipment through friendly countries, according to an August report by Business Korea.
 An employee displays the Huawei Mate Xs to media members during a video call for the launch of the foldable smartphone in London on Feb. 18, 2020. (Tolga Akmen/AFP via Getty Images)
An employee displays the Huawei Mate Xs to media members during a video call for the launch of the foldable smartphone in London on Feb. 18, 2020. (Tolga Akmen/AFP via Getty Images)

According to United Nations trade statistics, Malaysia’s imports from the world’s three largest semiconductor equipment countries—the United States, the Netherlands, and Japan—increased by $580 million in 2022, which was a year-over-year increase of 127.7 percent. At the same time, China’s imports of semiconductor equipment from Malaysia increased to $590 million.

There's speculation that China may have used Malaysia to circumvent U.S. export restrictions on semiconductor equipment and secure additional equipment, Business Korea reported.
In addition, an increasing number of South Korean headhunters are recruiting semiconductor experts for Chinese companies without disclosing the names of these companies.

Recruiting Chip Experts 

In 2008, the CCP launched the Thousand Talents Plan, which was halted when the United States investigated it as an industrial espionage operation led by Beijing. However, it's returning after being quietly rebranded as the Qiming Program, which is recruiting overseas talent and offering incentives such as housing subsidies and hefty signing bonuses.
China has also tried to acquire semiconductor companies in other countries. In 2021, Chinese private equity fund Wise Road Capital sought to acquire South Korean system chip maker MagnaChip Semiconductor for $1.4 billion. However, the sale was ultimately blocked by U.S. authorities on national security grounds, which led to the deal's collapse.
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