Huawei’s smartphone resurgence fuels sanctions ‘whodunnit’

• Huawei’s had a helping hand in dodging the US technology embargo, believe officials at the US Department of Commerce (DoC)
• The prime suspect is Chips Act golden boy Taiwan Semiconductor Manufacturing Co, which has protested its innocence and, so far, the DoC hasn’t launched an official probe
• But new evidence has come to light and a kerfuffle seems likely

The US Department of Commerce (DoC) is reportedly mulling an investigation into whether Taiwan Semiconductor Manufacturing Co. (TSMC) has knowingly, or unknowingly, helped Huawei to dodge the US government’s technology export controls. 

TSMC says it hasn’t been supplying US tech-based chips directly to the Chinese vendor but it seems one of its other customers has channelled TSMC-produced chips to Huawei, which is riding a new wave of 5G smartphone sales growth despite extensive trade restrictions: That there is a link to the giant Taiwanese chip producer makes it much more likely that the US authorities will feel obliged to launch a full investigation with possible fines for TSMC. 

As we all know, US trade sanctions were invoked in 2019 to prevent Huawei from deploying advanced chip technology for its smartphones and, latterly, for AI large language model (LLM) training and inferencing purposes – for more background information, see Is a splintered tech world on the way?

It was a move that initially poleaxed the Chinese giant’s high-end smartphone business, but also set it on a determined multi-pronged strategy to develop its own advanced silicon and/or source it from alternative channels. This it has apparently managed, either by circumventing the US sanctions and getting outside help to build cutting-edge capabilities into its own home-grown chips; by building its own 5G-capable chips from scratch on older 7 nanometer (nm) process tech and then persuading its users that its solutions would provide the features and capabilities they wanted without unacceptable technical impediments; or a combination of both approaches. 

Either way, it’s now producing smartphones that are being snapped up by Chinese users so, as things stand, it has successfully swerved the US restrictions… for the time being.

Officials within the DoC are said to believe that Huawei’s recent success is a sign that it had, indeed, received help to design, and even manufacture, the chips that went into smartphones, such as the Huawei folding Mate XT by using 7 nanometer processes already in use by Chinese company Semiconductor Manufacturing International Corporation (SMIC). While SMIC doesn’t have access to the most advanced lithography tools, it is able to use deep ultraviolet (DUV) lithography equipment to produce 7nm chips (rather than the more 5G-capable 5nm and 3nm chips) which, together with 5G design expertise from Huawei’s HiSilicon subsidiary, may have been enough to enable the giant vendor to produce an advanced 5G chip for its smartphones.

Suspicion, naturally perhaps, fell on Taiwanese contract chip manufacturer TSMC, which has a long business history with Huawei at all levels within the company.

TSMC has remained adamant that, in the words of Shaggy, “It wasn’t me”, and, according to Ars Technica, maintains that it strictly followed all the relevant requirements to ensure it’s not selling chips or passing information to intermediaries that might then pass them on to Huawei or other proscribed companies or countries.

Now, though, Agence France-Presse (AFP) reports that a Taiwanese government official has spilled the beans: It seems TSMC halted shipments to an as yet unidentified customer earlier this month after that customer supplied TSMC-made chips to Huawei, potentially breaching US sanctions. While TSMC reportedly immediately activated its export control procedures, which included halting shipments to the customer and notifying the relevant authorities in the US and Taiwan, to now find out that TSMC had somehow violated US sanction requirements, or covered up breaches by customers or partners, might result in a major investigation and huge fines for TSMC.

That would lead to embarrassment all round, since TSMC is the current poster child for the Biden administration’s Chips Act funding programme, having qualified for $6.6bn of direct funding and a further $5bn in loans from the US government to build three chip fabrication plants in Arizona at a total cost of $65bn.

While fingers are pointed and investigations prepared, Huawei continues to get stronger and stronger: The Chinese vendor’s revenues for the first six months of this year were up by 34% to 417.5bn yuan (US$58.6bn).

– Ian Scales, Contributing Editor, TelecomTV