US sets eyes on Chinese chipmaking facility following Huawei's flagship phone - report

The U.S. is targeting a Chinese-sanctioned chipmaker by denying its most advanced facility from more U.S. imports after production of a chip for Huawei Technologies’ flagship Mate 60 Pro phone, Reuters reported citing people with knowledge of the matter.

In 2023, the Commerce Department sent several letters to U.S. suppliers to Semiconductor Manufacturing International (OTCQX:SIUIF) halting consent to sell to its most advanced facility, the report added citing two people with knowledge of the matter.

Several companies had already suspended selling to SMIC South, as the unit is called, the letters restricted millions of dollars worth of deliveries of chipmaking materials and equipment from at least one supplier, Entegris (NASDAQ:ENTG), the report noted.

There was no proof that Entegris had not complied with any U.S. laws or regulations, according to the news agency.

Entegris noted that it made the deliveries as per a valid export license and suspended them after receiving letters from the Commerce Department halting authorization to ship products to SMIC South.

Entegris said it monitors and adheres to the “rapidly evolving regulatory requirements” for international trade impacting the chip industry, the report added.

The license suspensions by the Commerce Department, show the U.S. has taken action against SMIC amid growing pressure from some Republicans wary of China who want to hinder the flow of U.S. technology to the company reduce its ability to manufacture sophisticated chips.

Huawei surprised many in August 2023 by quietly launching its new phone, Mate 60 Pro. The company did not provide information on the power of the chip inside but people speculated that it could be using a 5G capable chip. The chip, reportedly made by China’s Semiconductor Manufacturing  ignited concerns in the U.S. and raised questions about how it was possible, without the company being able to access critical technologies.

The phone also prompted an evaluation by the U.S. to learn the details on the chip inside, which is the most advanced semiconductor China has manufactured as of yet.

Earlier this month it was reported that Huawei started focusing on AI and scaling back production of its Mate 60 phones, due to rising demand of AI chips and production constraints. The global chip race for AI supremacy has left the Chinese tech giant putting its handsets aside. Huawei once was in race with Apple (AAPL) and Samsung (OTCPK:SSNLF) to be the world’s biggest handset maker until U.S. restrictions, starting in 2019, began to curb its access to chip manufacturing tools needed to produce its most advanced models.

SMIC South could go to Chinese, Taiwanese, Japanese and Korean sources for most chemicals and equipment needed in the chipmaking process, said Lita Shon-Roy, CEO of market research firm Techcet, as per the report.

However, if SMIC’s top plant “saw its United States supply chain suddenly cut off, that could potentially interrupt their production for 3 to 9 months depending on inventories,” Shon-Roy added.

SMIC South could take time to find and carry out testing of new suppliers if it had done so already, Shon-Roy noted.

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