A Huawei Technologies unit is shipping new Chinese-made chips for surveillance cameras in a fresh sign the Chinese tech giant is finding ways around four years of U.S. export controls, two sources briefed on the unit’s efforts said. The sources said the shipments to surveillance camera manufacturers from the company’s HiSilicon chip design unit started this year, with some of the customers being Chinese. Recently, Huawei unveiled new smartphones that use advanced chips that analysts claim are domestically made. This suggests that Huawei is overcoming Washington’s export controls, which have barred it from obtaining components and technology without approval since 2019.
The development underscores the extraordinary lengths China’s tech industry has gone in recent decades to bypass U.S. supply chains, including spending hundreds of billions of dollars, hacking companies, and setting up shell companies that have evaded U.S. authorities. The efforts have been a critical driver of the Chinese industry’s rise to global prominence. Still, the U.S. government says they raise concerns about security and the risk of tampering with critical infrastructure.
Huawei seeks to reduce its reliance on American technology, partly because it is at odds with the U.S. government over the coronavirus crisis and a growing tit-for-tat between the two countries. But the effort to do so will be a long haul, and even if it proves successful, it won’t help Huawei avoid being hit with more sanctions as the administration continues its broad campaign against the company.
To do so, Huawei could redouble efforts to build production capabilities that don’t require U.S. tools, such as by buying nascent Chinese competitors or reverting to buying from Japanese and Korean suppliers. But such a move would likely crimp its smartphone business, which depends on cutting-edge chips that can support 5G wireless connections. Alternatively, the firm could buy processors from overseas suppliers, not on the U.S. government’s list of sanctioned entities, such as Samsung.
To make such a shift, Huawei must secure additional technology outside the United States and invest significantly in acquiring research teams in other countries. That would require it to pay a premium over what it pays for similar chips from American suppliers and may require a sacrifice of performance. Huawei would also have to make substantial investments in developing the chip-design software used to create such products and retraining engineers and managers. It’s still being determined whether that’s realistic given the current global trade tensions. Nonetheless, the move to test the waters on chip sales suggests that Huawei is trying to test the Trump administration’s resolve before more severe penalties are imposed. The company’s stock jumped this week on the news. Shares in companies that rely on the company for a big chunk of revenue fell. The Nikkei Asian Review reported on Thursday that Huawei told its global suppliers six months ago to build up a year of crucial parts to prepare for trade war uncertainties and that the company is moving quickly to seek new sources of supply.
