Evidence Mounts Of U.S. Tech Skirting Huawei Sanctions

Huawei: the bad boy of China technology, according to Washington and a growing number of U.S. allies. It’s on the Commerce Department’s so-called Entity List, and 38 more Huawei subsidiaries from around the world got put on that list on Monday. U.S. tech firms are not supposed to be selling them computer hardware to build out its 5G infrastructure.

Some might be getting around the rules. Huawei is getting the materials it needs from somewhere.

Months after the bans began, Huawei turned to subsidiary HiSilicon Technologies to develop the semiconductors needed for its fifth-generation telecom equipment. The need for Huawei to be self-sufficient became increasingly clear after Taiwan Semiconductor Manufacturing Co. ceased taking chipmaking orders from the client, in accordance with further tightened U.S. restrictions, the Nikkei Asian Review reported.

Stepping in to fill the void has been China’s muni governments.

“Mass purchases of electronics design automation (EDA) software by Chinese regional governments should be noted,” Koki Inoue, principal researcher at the Economic Research Institute of the Japan Society for the Promotion of Machine Industry, told Nikkei in a report dated back in June.

The Japanese think tank discovered that companies headed by the muni governments in China began setting up shop to develop a new fabless semiconductor manufacturer base as an end-around the Entity List restrictions. These new limited liability corporations are believed to number in the hundreds across the country and were set up in a matter of months, a true testament to China’s ability to create companies out of thin air and hope one of them survives on its own.

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Inoue’s research shows a surge in local government purchases of EDA software, which then is used by the new fabless makers to make the necessary chips.

The question is whether Huawei using these new municipally-owned tech manufacturers to develop the chips that HiSilicon is now banned from selling to them? It’s hard to know. But China watchers have a hunch that they are.  

“If HiSilicon dispatches engineers, a small company can re-create a development environment on par with HiSilicon,” Inoue said, assuming HiSilicon engineers are working at some of these places.

It’s a mystery that keeps Commerce on its toes.

“Huawei and its affiliates have worked through third parties to harness U.S. technology in a manner that undermines U.S. national security and foreign policy interests,” Commerce Secretary Wilbur Ross said in a statement released today. “This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so,” he added about the Huawei firms added to the list.

The Huawei units put on the Entity List stretch from China to Argentina, Brazil, Chile, Egypt, France, Germany, India, Mexico, The Netherlands, Peru, Russia, Johannesburg, Switzerland, Thailand, Turkey, the United Arab Emirates, and the U.K.

China: The Anger Continues

The China-U.S. relationship had already hit the skids. The coronavirus just made it that much worse.

Last week, Attorney General William Barr singled out Apple AAPL as an example of a “double standard” in how tech companies treat the U.S. government — critically and (by some standards) unfairly — and how they treat the Chinese government — with reverence and respect.

During a speech in Michigan on Thursday, Barr hinted at the possibility that American business leaders who advocate for Chinese interests could face prosecution under the Foreign Agents Registration Act, a law designed for firms lobbying on the behalf of a foreign entity.

Barr criticized Apple for what he described as acquiescence to the Chinese Communist Party, with a strict adherence to official policy compared to ignoring some U.S. policies.

Politico reported that Apple had removed privacy apps from its Apple store in China, and removed the Japanese owned Quartz news app after Beijing complained about its coverage of Hong Kong protesters. Apple is also moving some iCloud data to servers located in China, though this may be data of local Chinese users and not Americans.

The “double standard” Barr was referring to is largely in relation to law enforcement matters.

“Do you think when Apple sells phones in China that Apple phones in China are impervious to penetration by Chinese authorities?” Barr said. “They wouldn’t be sold if they were impervious to Chinese authorities. What we’ve asked for is when we have a warrant from a court, that we should be able to get into those cell phones. That’s the double standard that has been emerging among American tech companies.”

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