Yesterday, I wrote a blog about Huawei’s new Mate 60 line phone which means that the Chinese company found some way around U.S. export rules banning Huawei from receiving cutting edge chips from foundries using American technology. Questions are being posed privately and now publicly how this could have happened given the sanctions and U.S. Secretary Gina Raimondo said the Huawei and SMIC’s chip breakthrough was “incredibly disturbing and that the U.S. needs to find better methods to enforce export restrictions. The issue is an important one as the breakthrough is not limited to the development of cell phone systems but these chips have military applications as well as AI applications both of which are of major concern to our national security.
In addition, there is information now being revealed in published articles about the issue. Commerce says it won’t comment on its investigation as to how Huawei and SMIC were able to manufacture 7nm chips. One article suggested that SMIC used less efficient deep ultraviolet (DUV) machines. Others have said that SMIC anticipated the sanctions and bought equipment from existing plants before the sanctions were in effect.
According to recently published reports, SMIC was advertising that it had found a way to produce more advanced chips using dated equipment. It would take longer than Huawei’s previous supplier, Taiwan Semiconductor Manufacturing Company, it would cost more, and it might not work. But it was a chance. Huawei contacted SMIC to make a new smartphone .
In December 2020, SMIC was placed on the US sanctions list. This meant that any company wanting to sell technology to SMIC would require Washington’s written permission.
SMIC is a partially state owned publicly listed Chinese company making semiconductor chip. It is the largest contract chip maker in mainland China and has its own foundry. SMIC is headquartered in Shanghai and incorporated in the Cayman Islands. China’s state owned civilian and military telecom equipment company Datang Telecom, is a major shareholder in SMIC. Notable customers previously included Qualcomm and Texas Instruments. In 2019, SMIC applied for voluntary delisting fro the New York Stock Exchange following Trump’s crackdown on Chinese tec.In December 2020, SMIC the U.S. Department of Defense named SMIC as a company owned and controlled by the People’s Liberation Army and prohibited any American company or individuals from investing in it.
Nvidia corporation, An American multinational technology company incorporated in Delaware and based in Santa Clara California designs graphics processing units and high performance chip units. Nvidia also sells artificial intelligence hardware and software. The Wall street Journal has reported that Nvidia is seeking to redesign its advanced chips to direct it to the Chinese markets The Wall Street Journal has reported. China has historically formed about 20% of Nvidia’s revenue. As required by law, Nvidia has submitted information to the Securities and Exchange Commission listing its subsidiary companies. That list includes several companies in China. The list is published here; https://www.sec.gov/Archives/edgar/data/1045810/000104581023000017/listofregistrantssubsidiar.htm
Nvidia is the standard and Poor’s top performer in the S&P 500 and is said to be the most valuable chipmaker and prolific investors in artificial intelligence start-ups.
There may be more to the story and our government is committed to finding any US companies that may have helped Huawei and SMIC directly or indirectly. Whistleblowers may also help this effort.
JEFFREY NEWMAN AND HIS LAWFIRM REPRESENT WHISTLEBLOWERS UNDER THE SEC, CFTC AND FINCEN WHISTLEBLOWER PROGRAMS. SOME OF THE EXISTING CASES RELATE TO ALLERGATIONS OF SNACTION VIOLATIONS. HE CAN BE REACHED AT JEFF@JEFFNEWMANLAW.COM OR BY CALLING JEFF AT 617-823-3217
