US may sanction those rumored to be in covert Huawei chip network

Crouching entity list candidate, hidden semiconductor ... or that's the idea, anyway

The US government is considering measures against a number of Chinese semiconductor companies linked with technology giant Huawei, in what appears to be further escalation of Washington's chip wars strategy.

Reports suggest that the China-based companies or entities under the spotlight include some previously highlighted in claims last year that Huawei was working to build a covert network of fabs to combat US sanctions against it.

Those claims came from the Semiconductor Industry Association (SIA), a trade body for US chipmakers. It said Huawei had taken possession of two existing chip factories and was building a minimum of three others under the names of other companies to hide its involvement.

This could allow Huawei to circumvent restrictions and indirectly purchase chipmaking equipment or other supplies that would otherwise be off-limits to it.

These claims were not substantiated, however, and SIA itself issued a statement saying that reports based on a presentation it had given included several inaccuracies.

According to Bloomberg, the companies that may be blacklisted include chipmakers Qingdao Si'En, SwaySure, and Shenzhen Pensun Technology Co. It cites unidentified sources familiar with the matter, and claims that any final decisions have yet to be made.

Neither Huawei nor the US Department of Commerce were immediately available to comment on the latest developments.

Huawei has always denied that its kit poses a security risk to networks outside of China while the US has claimed it has potential backdoor access to mobile buildouts.

The reason for this latest set of measures against China-based technology companies is believed to be Huawei's unexpected release last year of the Mate 60 Pro, a premium smartphone powered by a 7nm homegrown processor produced by chipmaker SMIC, which US authorities had not believed Chinese companies were capable of producing.

Earlier this month, it emerged that Washington was planning to sanction more China-based technology companies by adding them to the Entity List maintained by the Department of Commerce's Bureau of Industry and Security, including memory chipmaker Changxin Memory Technologies (CXMT).

Those reports claimed that up to five Chinese companies were being considered. It isn't clear if they included those named by Bloomberg today.

Being on the Entity List means that any company or individual that wishes to export or transfer technology to the listed organization must obtain a license to do so.

Last year, Washington was understood to be pushing for an all-out block on any and all US technology export licenses to Huawei.

Huawei has operated under the weight of US sanctions since former president Donald Trump blacklisted the company in 2019 over allegations that its telecoms and IT kit represented a threat to national security.

In a sign it may have given up trying to persuade Washington to soften its stance, Huawei stood down its public and government relations teams in America at the start of this year.

Earlier this month, the Biden administration is understood to have pressured photolithography giant ASML from servicing and repairing chipmaking equipment previously sold to customers in China, and in February more than a dozen Chinese tech companies were added to a list of entities claimed by the Department of Defense (DoD) to be working for the military. ®

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