House Lawmakers Urge Raimondo to Take Action Against Huawei’s ‘Clandestine’ Semiconductor Suppliers

A pedestrian talks on the phone while walking past a Huawei Technologies Co. store in Beijing on Jan. 29, 2019. Kevin Frayer/Getty Images

The bipartisan leaders of a House committee are asking the Biden administration to take urgent measures to prevent U.S.-sanctioned Chinese telecom giant Huawei from obtaining U.S. chipmaking equipment through its “clandestine network of semiconductor companies.”

Chairman John Moolenaar (R-Mich.) and ranking Democratic member Raja Krishnamoorthi (D-III.) of the House Select Committee on the Chinese Communist Party sent a letter to Commerce Secretary Gina Raimondo on Oct. 16, informing her that Huawei’s semiconductor ambitions “clearly threaten” U.S. national security.

Huawei is attempting to “circumvent restrictions” imposed by the Commerce Department on U.S.-produced semiconductor manufacturing equipment (SME) in building up its chipmaking facilities, the lawmakers wrote.

“Restricting the flow of SME to Huawei’s clandestine network of semiconductor companies will send an important signal to both [China] and Huawei that the United States will take appropriate action to prevent U.S. technology from enabling its problematic technology ambitions,” the letter reads.

The United States, Japan, and the Netherlands have imposed restrictive controls that prevent the sales of advanced semiconductor manufacturing equipment to China. These export controls have hindered China’s access to major equipment manufacturers, such as Applied Materials, Lam Research, and KLA in the United States; ASML in the Netherlands; and Tokyo Electron in Japan.

Huawei was placed on the Commerce Department’s trade restriction list, known as the Entity List, in 2019. The Pentagon has identified Huawei as one of the Chinese companies that have ties to the Chinese military. This year, the Biden administration revoked eight licenses that had allowed some companies to sell their products to Huawei.

The lawmakers named Chinese companies Pengxinxu, SwaySure Technology, Qingdao Si’En, and “potentially many others” as likely companies in Huawei’s “clandestine chip network.”

“Knowledge of these firms and their close connections to Huawei have been repeatedly described in public news reports, including by conducting physical site visits to ascertain these firms’ connections with Huawei,” the letter reads.

SwaySure is the sister company of Chinese company PXW Semiconductor, the lawmakers noted. PXW was added to the Commerce Department’s Entity List in December 2022 “based on information that this company represents a risk of diversion to a party” on the list.

Given PXW’s inclusion in the entity list, the lawmakers argued that “it stands to reason its sister companies, which are also suppliers in the semiconductor industry, and openly reported close connections with Huawei would carry the same risk.”

“We must continue in our efforts to deny Huawei, and similar firms, the ability to access U.S. technology that undermines our national security,” the letter reads.

“Failing to do so will only benefit a small group of American companies producing SME at the expense of chipmakers worldwide who cannot sell their chips, undermining the intent of the Huawei listing, and harm our national security.”

Semiconductors

In early September, the Biden administration rolled out new export controls on critical technologies to block China’s access. The new restrictions cover quantum computing, advanced semiconductor manufacturing equipment, gate-all-around field effect transistor technology, and manufacturing materials used to produce metal or metal alloy components.

Global industry association SEMI predicted in a report published last month that China’s semiconductor manufacturers will invest more than $100 billion in chipmaking equipment over the next three years.

In 2020, the U.S.-based Semiconductor Industry Association trade group projected in a report that China will have the world’s largest share of semiconductor production, 24 percent, by 2030 because of state subsidies. The report also noted that the United States manufactured 12 percent of semiconductors, down from 37 percent in 1990.

In April, Raimondo discussed U.S. concerns regarding the Chinese Communist Party’s use of “non-market” policies and practices to dominate the global market for legacy semiconductors.

Legacy semiconductors are defined as chips that are 28 nanometers (nm) or larger and are manufactured by mature semiconductor fabrication technologies that have been around for 10 to 20 years. The most advanced semiconductors, which can be as small as 3 nm, are made with cutting-edge equipment and technologies.

In June, at a congressional hearing, Moolenaar mentioned China’s rapid investment in legacy semiconductor manufacturing.

“China added more legacy semiconductor manufacturing capacity in 2024 than the rest of the world combined, and that capacity is expected to grow by a further 13 percent this year alone,” he said.

“With 18 new fabricators set to begin operations, the [Chinese Communist Party] announced a further $47.5 billion in subsidies in May.”