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US probes made-in-China chip as alarm over Huawei grows

NEW YORK - The US government has begun an official probe into an advanced made-in-China chip housed within Huawei Technologies’ latest smartphone, a revelation that’s set off a debate in Washington about the efficacy of sanctions intended to contain a geopolitical rival.

The Commerce Department, which enacted a series of restrictions against Huawei and China’s chip industry over the past two years, said it’s working to get more information on a “purported” 7-nanometer processor discovered within the Mate 60 Pro. The chip was made by China’s Semiconductor Manufacturing International Corp., which like Huawei is blacklisted by the US and restricted from accessing American technology.

Huawei’s quiet reveal of a mobile phone utilising technology the US has sought to keep out of Beijing’s hands threatens to derail recent efforts of outreach by the Biden administration. The phone went on sale online while Commerce Secretary Gina Raimondo was on a trip to China last week, the latest in a series of high-level diplomatic visits to Beijing.

The debate now centres around whether it represents a failure of US efforts to hamstring China’s tech sector, which Washington fears will give it a military edge. It’s also raised questions about whether the main US mechanisms to do that - controls on exports of key materials, tools and knowhow - need to be tightened.

Chinese semiconductor equipment makers soared as much as 20 per cent after news of the US probe spurred bets that the sector will enjoy increased state support. That advance was mostly led by companies related to lithography gear - a weak link in China’s chip supply chain and one Beijing is keen to develop. Shanghai Electric Group, whose controlling shareholder has a major stake in lithography specialist Shanghai Micro Electronics Equipment Group, rose by its 10 per cent limit.

“We are working to obtain more information on the character and composition of the purported 7nm chip,” a Commerce spokesperson said in a statement. “Let’s be clear: export controls are just one tool in the US government’s toolbox to address the national security threats presented by the PRC. The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself - at a substantial cost to the PRC government.”

The Mate 60 Pro smartphone employs an unusually high proportion of Chinese parts, in addition to its main processor, an ongoing teardown by TechInsights conducted for Bloomberg News revealed, a sign of the country’s progress in developing domestic tech capabilities.

US National Security Advisor Jake Sullivan has said he would withhold comment until the US gets more information.

“There’s a number of different methods to try to sort of come to an understanding of what exactly it is that we’re dealing with here,” Mr Sullivan told reporters aboard Air Force One on Thursday. “I can’t give you an exact number of days but this is not going to be months down the road. We’re going to want to look at this carefully, consult with our partners, get a clearer sense of what we’re looking at, and then we’ll make decisions accordingly. “

Huawei’s new devices have spurred an outpouring of nationalist sentiment on Chinese social media, which portrayed them as a triumph in the face of US sanctions.

On Friday, Huawei debuted an even more powerful smartphone - the Mate 60 Pro+ - in an online video teaser. The Pro+ adds a 1-terabyte maximum storage option and 4GB more memory than on the Pro model, which retails at 6,999 yuan (S$1,317). Shares of Huawei suppliers soared as much as their 10 per cent daily limit on Chinese exchanges after that latest offering hit online stores. BLOOMBERG