Huawei’s Surprise Phone Gives Ammo To Biden Doubters On China

(Bloomberg Businessweek) -- Huawei’s quiet reveal of a mobile phone utilizing technology the US has sought to keep out of Beijing’s hands has set off alarm bells in Washington this week and threatened to derail recent efforts of outreach by the Biden administration..Nearly a week after the Mate 60 Pro was released by Huawei Technologies Inc.—a Chinese telecommunications giant that has been the target of US sanctions and export controls for years—there are still more questions than answers about its development and what comes next. .First among those is whether it represents a failure of US efforts to hamstring China’s tech sector, which Washington fears will give it a military edge, and whether its main mechanisms to do that—controls on exports of key materials, tools and knowhow—need to be tightened. .The US government will likely now undertake its own investigation into the phone, says Nazak Nikakhtar, who worked as the Commerce Department’s Assistant Secretary for Industry & Analysis in the Trump administration..That study would be led by the Commerce Department’s Office of Export Enforcement, potentially in consultation with the Federal Bureau of Investigation and other federal agencies, and would seek to determine whether the phone’s processor, developed by China’s Semiconductor Manufacturing International Corporation, or SMIC, was made using US tools or technology.. An analysis of the phone conducted for Bloomberg News revealed it was powered by a 7-nanometer processor, which is just a few years behind the most-current technology. (As a rule, the smaller the nanometer, the more sophisticated the chip.) While that’s not as sophisticated as the chips in the latest iPhone, it’s more advanced than the 14-nanometer threshold that the US has said it doesn’t want China to go beyond..US National Security Advisor Jake Sullivan has said he would withhold comment until the US gets more information. The Commerce Department said Thursday it’s working to get more details on the “purported” 7-nm processor discovered..“Let’s be clear: export controls are just one tool in the U.S. government’s toolbox to address the national security threats presented by the PRC,” a Commerce spokesperson said in a statement. “The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself—at a substantial cost to the PRC government.”.The Biden administration has tried to deny China access to the world’s most advanced semiconductors by limiting the sales of technology or equipment needed to make them, including machinery manufactured in other countries. The existing set of restrictions could be tightened or expanded..In addition, the administration could update Commerce Department’s policies on Huawei to deny new licenses and revoke existing ones. That would be the fastest way of cracking down on Huawei and SMIC because it wouldn’t require new legislation or an overhaul of the current policy..However, until an investigation is carried out and more information is gleaned about how exactly Huawei and SMIC developed the chips—including whether they did it on their own or by using non-US tools—it will be hard for the administration to determine who or what to target..House Republicans critical of President Joe Biden’s positions on China were quick to call for strong action, including demanding answers from the Commerce Department’s BIS, which oversees export controls. (The phone was released just as Commerce Secretary Gina Raimondo was wrapping up a visit to China last week, a timing choice widely interpreted as intentional.).For Representative Michael McCaul, the chairman of the House Foreign Affairs Committee, it’s past time for greater restrictions on Huawei and SMIC..McCaul on Wednesday said SMIC likely violated US regulations by supplying the components to Huawei, which has been blacklisted by the US since 2019. .“We’ll be requesting a briefing from BIS on the matter and will continue urging them to strengthen our controls to prevent more circumstances like the one we’re seeing right now,” he said in a statement..Representative Mike Gallagher, the chairman of the House Select Committee on Competition with China, picked up on that theme, suggesting the US should end all its exports to both Huawei and SMIC, even those involving older technologies that are currently allowed under the law..“The time has come to end all U.S. technology exports to both Huawei and SMIC to make clear any firm that flouts US law and undermines our national security will be cut off from our technology,” he said in a statement..Nikakhtar, the former Commerce official, says Huawei’s breakthrough highlights the gaps in the export controls, which need to be tightened on the entire Chinese tech sector. .“SMIC is going to get better and better with throughput over time,” she says. “And so we should not be surprised to see Huawei scale up with indigenously sourced chips.”.And lest all this concern over one gadget might be overblown, she highlighted the security implications of China’s potential dominance of the semiconductor market..“Hypersonic capabilities, weapons of mass destruction, everything is electronics now,” she says, adding that China’s ability to take more control of the semiconductor supply chain is “terrifying.” .“Those are the discussions that are giving rise to this frantic state in the US government about the semiconductor race with China,” she says. .While China’s state-backed media hailed the phone as a breakthrough and China hawks in Congress demand stricter restrictions to safeguard national security, experts highlight it’s too soon to know if Beijing has bested US efforts..The other main question now for Washington is whether Huawei and SMIC can produce the advanced chips with their own equipment and expertise at a scale that threatens Western firms and US technological dominance..“We should actually be pretty cautious in how we interpret this,” says Chris Miller, author of . “Huawei has a great job of publicizing this but I don’t think we should conclude that it means something that it doesn’t necessarily mean. We shouldn’t over-estimate the impact of this news.”.Says Miller: “Absent great data on yield and cost and volume, it definitely doesn’t mean that SMIC will have an easy pathway toward 5 nanometer.” — and .(Updates with Commerce Department’s comment in the seventh paragraph).More stories like this are available on bloomberg.com.©2023 Bloomberg L.P.

Huawei’s Surprise Phone Gives Ammo To Biden Doubters On China

Advanced chip in new phone spurs Republican calls for tighter controls.

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Huawei’s Surprise Phone Gives Ammo To Biden Doubters On China

Advanced chip in new phone spurs Republican calls for tighter controls.

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