Reports of an advanced chip in Huawei Technologies' newest smartphone are "incredibly disturbing," U.S. Commerce Secretary Gina Raimondo said during a Senate committee hearing on Wednesday.
The Chinese telecoms giant quietly unveiled its new 5G phone, the Mate 60 Pro, in late August—coincidentally during Raimondo's visit to China. A teardown of the phone revealed it used an advanced, China-made 7-nanometer processor.
The discovery raised eyebrows among analysts—and U.S. officials. The 7-nm chip is still a few generations behind the 3-nm and 4-nm chips produced by leading semiconductor firms like Taiwan Semiconductor Manufacturing Company and Samsung.
Huawei, which also makes telecomunnications equipment, was previously a competitor of Apple and Samsung in the smartphone industry. Yet it relied on non-Chinese firms for the most advanced chips. In 2019, the Trump administration placed Huawei on a trade blacklist, due to national security concerns around the company's alleged ties to the Chinese military. Huawei, cut off from cutting-edge semiconductors, put its smartphone plans on hold and sold off its budget smartphone division.
Yet the Mate 60 Pro shows that Huawei may have figured out a way around U.S. controls. State media celebrated the company's achievement as proving that China could shrug off the U.S.'s widening tech controls.
"If you look at it from China's perspective, yes it's a breakthrough," Kirk Yang, chairman of Kirkland Capital and longtime tech analyst, says. Yet Yang thinks Huawei and other Chinese companies won't be able to go much further while still using older equipment. "You're probably losing money on every chip you make, and by using older equipment, you could take two or three times longer to make the chip," he says.
In her Senate hearing, Raimondo declined to comment on investigations into Huawei’s alleged chip breakthrough, yet pointed out that her department imposed a $300 million fine on Seagate for violating controls on sales to Huawei.
Huawei did not immediately respond to a request for comment.
The U.S. is concerned that Chinese advancements in technology could bolster the country's military. Last October, the Biden administration enacted sweeping export control measures to restrict China's ability to procure advanced chips. Washington also successfully persuaded allies to stop the transfer of state-of-the-art lithography equipment used to produce cutting-edge semiconductors.
The U.S. is expected to announce expanded controls on chip sales to China this month.
Yet it may prove tricky to stop Chinese companies like Huawei from building out their own domestic chip supply chains. Earlier this week, Bloomberg reported that several Taiwanese companies are quietly helping Huawei build a network of semiconductor plants across southern China.
On Thursday, Taiwan's Ministry of Economic Affairs said it will investigate the companies mentioned in Bloomberg's report. The companies have denied exporting sensitive technology to China.
“We need different tools” to enforce U.S. controls, Raimondo said on Wednesday. “The threat from China in 2023 is different than the Cold War threats of decades ago. It’s technology, it’s AI, it’s moving fast," she said.
Raimondo is currently trying to rebuild the U.S. relationship with Beijing. Earlier this year, both Washington and Beijing agreed to establish a new working group to meet on commercial issues. "It's baby steps," Raimondo said at Fortune's CEO Initiative conference on Tuesday. “Hopefully the baby steps lead to bigger steps," she continued.
Yet she stuck to a tough line on the U.S.'s policy towards tech transfers to China. “They know we’re ahead in these areas of emerging tech,” she said on Tuesday, continuing that Washington would be "a little bit crazy" to let China's military use these new technologies.
