US to Probe Chips Used in Huawei's New Smartphone

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Facts

• White House national security adviser Jake Sullivan said Tuesday that the US is trying to obtain details about the computer chip powering Huawei's newly-released Mate 60 Pro smartphone, which has been touted as a PRC chip breakthrough despite US restrictions.¹
• This comes as a third-party analysis claimed the device is powered by the Kirin 9000s chip, a new 7-nanometer processor made by China's top chipmaker, Semiconductor Manufacturing International Corp (SMIC).²
• The analysis concluded that the chip was manufactured using extreme ultraviolet lithography, a cutting-edge, closely-guarded technique developed by Dutch company ASML that China has mostly been blocked from accessing.³
• The report from US semiconductor research firm TechInsights has fueled speculations that Shanghai-based SMIC could have helped Huawei to clandestinely circumvent US tech sanctions. Both companies are on the US Entity List.⁴
• Huawei started selling its latest flagship 5G smartphone last week, coinciding with a visit by US Commerce Secretary Gina Raimondo to China. No information on the power of its chipset was provided in the specifications.⁵
• Meanwhile, Reuters reported Tuesday that Beijing plans to launch a new state-backed investment fund aiming to raise around $40B for its semiconductor sector in a boost to catch up with the US and other rivals.⁶

Sources: ¹Ft, ²Bloomberg, ³The telegraph, ⁴South china morning post, ⁵Guardian and ⁶Reuters.

Narratives

• Pro-China narrative, as provided by China Daily. It's certainly too early to assert that Huawei's Mate 60 Pro shows that China will be able to continue bypassing US sanctions, but this latest smartphone does hint that the PRC's domestic semiconductor industry may have innovation capabilities to break new ground. US tech sanctions have failed to curb Chinese tech development while simultaneously harming American companies.
• Anti-China narrative, as provided by Washington Post. Though indeed a breakthrough, this latest development doesn't come as a surprise given that older manufacturing tools are still capable of making more advanced semiconductors. Given the current restrictions, US export curbs related to China's chip industry will likely prevent its chipmakers from going beyond 5-nanometer processors while foreign rivals will advance. If not, the West must further tighten up its chip-related sanctions on the PRC.

Predictions