Expanded U.S. Restrictions on Huawei Escalate China’s Semiconductor Conflict

The United States has imposed restrictions on exports to Huawei, the Chinese telecom equipment giant, as part of a wider plan to hamper China’s technology sector. This new wave of sanctions will impact China’s semiconductor, artificial intelligence and quantum computing industries, which are crucial for achieving tech dominance in both military and commercial sectors.

The Biden administration has stopped licensing US companies from exporting technology to Huawei and is reportedly aiming for a complete ban on sales of US technology to the company, according to sources within the White House, who spoke with the Financial Times. The move is expected to significantly affect China’s largest chipmakers, including Semiconductor Manufacturing International Corp (SMIC) and Yangtze Memory Technologies Corp (YMTC), as well as smaller domestic rivals such as Hua Hong Semiconductor.

Paul Triolo, a China tech expert at the Washington D.C. business consultancy Albright Stonebridge, stated that the new end-use controls are designed to automatically restrict the growth of other Chinese companies, such as Hua Hong, who want to improve their technology capabilities and work on 14 nm technology. According to Triolo, the system is set up to keep China behind at a fixed technology level, which is in line with comments made by U.S. National Security Advisor Jake Sullivan in October that the US would no longer use a ‘sliding scale’ to maintain the tech dominance of US companies.

Politico reported on January 27 that the White House is considering a plan to ban US businesses from entire segments of China’s tech industry. This was confirmed by new House Foreign Affairs Committee Chairman Michael McCaul, along with four congressional and former national security officials.

EE Times spoke with Keith Krach, a former undersecretary at the Department of Commerce under the Trump Administration, who played a role in the development of the CHIPS and Science Act. Krach stated that SMIC and YMTC, along with dozens of other Chinese companies and their subsidiaries, pose a significant national security threat to the US, as they are building semiconductors for their military. Krach added that the US government should prioritize restrictions on Alibaba, Baidu, and Tencent, which are critical to China’s military AI program and enabling its surveillance state, second only to Huawei.

Huawei, which was founded in 1987 by former People’s Liberation Army officer Ren Zhengfei, is now one of the world’s largest telecommunications companies. In 2020, Huawei became the world’s largest smartphone maker, but its smartphone business plummeted when the US government cut off the supply of advanced chips from TSMC to Huawei.

According to Krach, Huawei is the backbone of the Chinese government’s surveillance state, a tool of its military machine, and complicit in the genocide of Uyghurs in Xinjiang. The company is listed on the Commerce Department’s ‘entity list’ and the Pentagon’s list of communist Chinese military companies, and has a leadership structure embedded with Communist Party cells. Huawei has also been accused of stealing intellectual property, obstructing justice, lying to banks, and the US government.

In an effort to rebuild its supply chain and shift away from smartphones, Huawei invested in China’s semiconductor sector via its Hubble Investment arm. The company is buying more processors from Chinese chipmakers like SMIC and is expanding into new businesses like datacenters and cloud services, which has raised red flags for the US. Triolo stated that US officials are likely concerned that Huawei could eventually help Chinese firms move up the value-added chain and overcome US export controls on semiconductor manufacturing tools.

Despite US restrictions, Intel and Qualcomm, both US-based companies, still sell chips to Huawei that are not blocked by previous sanctions, according to the Financial Times. An anonymous investor in global