Congress To Commerce: Sanction More Chinese Chip Firms To Stop Huawei's Evasion

US elected officials are urging the Commerce Department to take action to prevent Huawei from building a network of "clandestine semiconductor facilities used to circumvent US law." 

The letter, published on the website of the House Select Committee on the Chinese Communist Party, urges Commerce Secretary Gina Raimondo to take action against Chinese chip firms that Huawei has been using as cover to acquire semiconductor manufacturing equipment (SME) since it was hit by US sanctions.

"We write to respectfully seek your agency's urgent action to address Huawei's rapid buildout of semiconductor fabrication facilities and address attempts by Huawei to conceal its involvement with these facilities as part of an effort by the company to circumvent restrictions imposed by your agency," urged the letter, penned by Committee chair John Moolenaar (R-MI) and ranking member Raja Krishnamoorthi (D-IL).

"These facilities still rely on a large number of US-produced SME, which provides the United States with an opportunity to deny Huawei its chip ambitions," the letter continued. "Such ambitions clearly threaten our national security." 

Tell us something we don't know

It's hardly a secret that Huawei has its own semiconductor ambitions - after all, US sanctions imposed in 2019 have crippled the Chinese tech giant - for a time. Huawei's slowdown was short lived, and the firm has bounced back with a vengeance, thanks to its surprise ability to manufacture chips the US thought China was unable to produce. China, it turns out, has been shoring up domestic chip manufacturing capabilities, clandestine or otherwise, for some time.

It's not like China has been secretive about its desire to improve its domestic chip supply chain - sanctions have cut off its access to chips developed outside its borders, and Huawei is known to be working on a massive new R&D facility near Shanghai that will be dedicated, in part, to developing new chip-making kit. 

But the crux of the Committee letter focuses on reports from last year that Huawei was allegedly working in secret to build a secret network of companies dedicated to stealing US SME and other chip technology, and those reports appear to be largely unsubstantiated, or at the least not nearly as hush-hush as they appear at first glance. 

The letter singles out three particular firms as being part of Huawei's "clandestine chip network": Pengxinxu, SwaySure, and Qingdao SiEn. The 2023 Bloomberg story the Committee cited for support is based on an internal slide deck from the Semiconductor Industry of America allegedly warning members of China's plans, but the SIA itself said those reports were overblown. 

"The story focused on a set of widely reported developments mentioned in an SIA summary of commercial market trends for its members," the trade group said the day after the Bloomberg story. "Summarizing such trends from publicly available information is a routine trade association activity."

• Intel CEO says sanctions on China squanders opportunity for US chipmakers like Intel
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• US tightens export controls on quantum kit and chips for China, Iran, Russia
• China's new sanctions loophole: Use export-controlled chips inside the US

As we understand it, SIA's analysis was also based on other news stories, notably coverage from Nikkei and - funnily enough - Bloomberg on the issue of China's circumvention of US sanctions. That gets us up to the present, by and large, with a Committee letter based on a year-old Bloomberg story that is itself based in part on an analysis of a two-year-old story from the same publication. 

And here we thought it'd be AI that'd cause this sort of news ouroboros. 

Wait, we have more!

Questionable sourcing of some parts aside, there's plenty of additional justification for the addition of Pengxinxu, SwaySure, and Qingdao SiEn to the Commerce Department's entity list in the Committee's letter.

The inclusion of one of the other members of Huawei's clandestine chip ring, PXW Semiconductor Manufactory, to the list in December 2022 is cited as part of the evidence because it was added for allegedly helping listed entities (like Huawei) evade sanctions. 

Much of the other evidence the Committee cites in its letter is based on sources from China, which it admits don't necessarily pass journalistic muster. These include Baidu posts claiming ties between Huawei and other entities, which the Committee asserts are connected by state-backed investment groups.

"The amount of circumstantial evidence in China that many of these already blacklisted firms are colluding to supply Huawei is significant," an aide for the majority side of the Select Committee told The Register.

Suffice it to say, we know there's a web of Chinese companies colluding to keep Huawei and other Chinese tech giants supplied with SME and materials - the Biden administration has even looked into sanctioning some of the companies listed in the Committee letter, though they haven't been added yet.

The Commerce Department, for its part, doesn't seem too fazed by the letter. When asked for comment, its reply was brief: "We've received the letter and will respond through the appropriate channels," a spokesperson told us. ®