Huawei building secret chip network to dodge US sanctions: report

Sanctions have reportedly prompted Chinese tech giant Huawei to try and work around those curbs

Huawei is facing allegations it is assembling a secret network of semiconductor manufacturing facilities in China to dodge U.S. sanctions levied on the company because of national security risks, according to a new report.

The Chinese tech giant began producing chips last year and has received an estimated $30 billion in government funding that has allowed Huawei to establish two manufacturing plants with three others under construction. Those efforts were detailed by the Semiconductor Industry Association in materials that were first reported by Bloomberg.

Huawei was added to the U.S. Commerce Department’s export control list in 2019 due to concerns about potential risks posed to national security stemming from its status as a China-based telecommunications firm that could be tapped by the Chinese government to provide data useful for intelligence-gathering. Huawei has denied posing a security risk.

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Huawei

Huawei is reportedly using manufacturing facilities operating under different business names to circumvent U.S. restrictions on semiconductor exports. (REUTERS/Aly Song / Reuters Photos)

Those export controls, which are designed to prevent U.S. firms from selling advanced technologies to Huawei, also extend to semiconductors and chipmaking equipment that’s used to power Huawei’s telecommunications equipment. 

If Huawei, as the Semiconductor Industry Association noted, is building chips using facilities operating under other business names, it could enable Huawei to circumvent U.S. sanctions to buy chipmaking tech from U.S. suppliers through an intermediary that isn’t subject to export controls.

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Huawei logo is seen in stock image

Chinese telecommunications giant Huawei Technologies has been subject to U.S. sanctions and export controls since 2019. (istock / iStock)

The Commerce Department’s Bureau of Industry and Security (BIS) noted that it’s monitoring actions taken by Huawei and other companies and updating export controls related to Chinese firms as threats evolve.

"Given the severe restrictions placed on Huawei, Fujian Jinhua, PXW and others, it is no surprise that they have sought substantial state support to attempt to develop indigenous technologies," a BIS spokesperson told FOX Business. "BIS is continually reviewing and updating its export controls based on the evolving threat environment and, as evidenced by the Oct. 7 2022 rules, will not hesitate to take appropriate action to protect U.S. national security."

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Chinese President Xi Jinping on war

The Chinese government has retaliated against the U.S. and its allies over restrictions on high-end semiconductor exports. (Fox News/Photo illustration / Fox News)

The Semiconductor Industry Association (SIA) and Huawei did not immediately respond to requests for comment. SIA noted to Bloomberg that, "These developments were already publicly reported on by multiple media outlets months before SIA highlighted these news items at an association meeting discussing market trends."

The Chinese government has been engaged with the U.S. and its allies in a tit-for-tat exchange of trade restrictions related to semiconductors. 

This spring, China slapped restrictions on Micron, a leading producer of chips used in computer memory and data storage hardware, after the U.S. and Japan announced curbs on Chinese firms’ access to tech used in chip manufacturing. China’s lead cybersecurity regulator cited "serious network risks to China’s critical infrastructure supply chain, affecting China’s national security," as the reason for the restrictions.

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Chipmakers have raised concerns about export curbs to Chinese firms going too far and hurting their competitive position. The SIA, which is the largest trade group representing chipmakers, issued a statement last month arguing against the expansion of restrictions on chip exports to China — which was the world’s biggest buyer of semiconductors last year. Firms like Nvidia have had to rework their product offerings to ensure they're selling products in China that comply with U.S. export controls.

SIA urged the U.S. government to "refrain from further restrictions until it engages more extensively with industry and experts to assess the impact of current and potential restrictions to determine whether they are narrow and clearly defined, consistently applied, and fully coordinated with allies."

Reuters contributed to this report.