Huawei's Alleged Secret Chip Fabs to Bypass US Sanctions

11-09-2023 | By Robin Mitchell

With the semiconductor war raging on between the West and China, mounting sanctions continue to give Chinese semiconductor manufacturers grief. Recently, accusations have been launched against Huawei, stating that they are secretly developing foundries to circumvent US sanctions. What challenges has China faced with regard to semiconductor fabrication, what exactly are the accusations, and can the West do anything about it?

Huawei Telecom Company Logo on Moscow Office Building Under a Clear Blue Sky - August 30, 2019, Russia

What challenges has China faced with regard to semiconductor fabrication?

For the past few years, tensions between the West and China have continued to escalate, with factors including the potential invasion of Taiwan, the continuing aggression of Chinese ships in the South China Sea, and the increasing military power that China continues to build. Additionally, the discovery of backdoor chips in Western server equipment, along with the dominance of Chinese systems in critical infrastructure, has raised alarms regarding Western security and the ongoing investment practices of China whereby it traps poorer countries in debt for the sake of leveraging control clearly indicates that China has interests far beyond its own borders.

As a result of this escalating tension, numerous sanctions have been placed by both parties, with China restricting access to Chinese AI and raw materials such as gallium and germanium, while the West has heavily restricted access to cutting-edge semiconductors and technologies needed to manufacture them. In particular, the US has been so committed to preventing semiconductor access to China that it has persuaded (potentially coerced) other nations (such as The Netherlands) to restrict any and all technologies that are loosely related to semiconductors.

While these sanctions have little effect on China’s ability to manufacture typical semiconductors (such as diodes, transistors, and even microcontrollers), they outright prevent China from being able to produce the latest node technologies in the single nanometre range. 

Even though some Chinese manufacturers have seen potential success in producing single nanometre devices using older equipment, it still introduces numerous challenges, including high manufacturing costs and poor yields. To make matters worse, device manufacturers such as TSMC actively refuse to ship such semiconductors to China, making it almost impossible for China to develop next-generation technologies. 

To try and counteract these sanctions, the Chinese government decided to invest heavily in the semiconductor industry, called the Big Fun, with an estimated $143 billion being made available as of December 2022. However, while some successes have been seen resulting from the fund, it was also discovered that mass corruption saw little results, with some executives pocketing the money for themselves. 

With a lack of skilled workforce, access to technology, and manufacturing difficulties, China remains some years behind the rest of the world with regard to semiconductors.

Huawei is supposedly building secrete foundries

As Huawei is blacklisted by the US government, it is virtually impossible for it to get access to the latest semiconductor manufacturing equipment (such as Extreme UV lithographic machines). This is why Huawei, in particular, has been experimenting with older EUV systems to try and develop next-generation technology, but this has only yielded partial success. 

However, recent accusations from a leading association of semiconductor manufacturers are claiming that Huawei is secretly building semiconductor foundries that will try to circumvent US sanctions. Simply put, if Huawei can successfully create a front and hide its connection, it is possible for that front to get a hold of equipment and manufacture devices for Huawei, or worse, ship the equipment back to mainland China.

According to a recent report by The Guardian, the Washington-based Semiconductor Industry Association has alleged that Huawei is constructing a collection of clandestine chip-making facilities across China. This move is seen as an attempt to bypass US sanctions. The report suggests that Huawei has already acquired two existing plants and is in the process of building three more, backed by an estimated $30 billion in state funding.

With $30bn from the Chinese government, Huawei has supposedly already acquired two foundries, with three more under construction. If these accusations are true, then it could very well indicate a new form of war in the ongoing battle between the West and China. One of the primary concerns behind Huawei was its ties to the Chinese government, and the combination of the $30bn fund along with numerous foundry acquisitions would only go to prove this concern.

Can the West do anything about these accusations?

If Huawei really is trying to secretly build foundries, it is most likely that the West already knows about it. Purchasing foundries is no small feat, and building them even more means that it should be relatively easy to perform background checks on investors and companies. 

For example, a new company that suddenly receives a few billion dollars for the sake of creating a new foundry clearly indicates something suspicious, especially considering that foundries are usually built by well-established companies. Even if a foundry is taken over by an investment firm, there will undoubtedly be reporting mechanisms and avenues for authorities to monitor such plants for potentially illegal activity. 

In fact, even if a Chinese-owned foundry in the West got access to the latest EUV system, it wouldn’t be trivial to smuggle. The sheer size of such equipment combined with the expertise needed to install and maintain them would make moving such equipment impractical. Furthermore, the sale of just a single EUV system would immediately raise flags in national security departments.

Is there any truth in these accusations? We have no way of knowing for sure at this time. Is it likely to be true? Most likely, China is falling behind the semiconductor race and desperately needs to gain access to the latest devices in order to power its next generation of AI and military.

A similar report from The Register echoes these claims, adding that Huawei's move into chip fabrication is a strategic decision, especially considering the challenges it faces in selling networking gear. The Semiconductor Industry Association's report, which was summarised from publicly available information, has been downplayed by the association itself, stating that it did not issue any warnings or alarms regarding Huawei's actions.


By Robin Mitchell

Robin Mitchell is an electronic engineer who has been involved in electronics since the age of 13. After completing a BEng at the University of Warwick, Robin moved into the field of online content creation, developing articles, news pieces, and projects aimed at professionals and makers alike. Currently, Robin runs a small electronics business, MitchElectronics, which produces educational kits and resources.