China Flexes Tech Muscles By Unveiling A New Phone

"The release of a homegrown Chinese smartphone during a visit by the Biden official in charge of regulating such technology shows the U.S.-China tech conflict is alive and well.

In the midst of the U.S. commerce secretary's good will tour to China last week, Huawei, the telecom giant that faces stiff U.S. trade restrictions, unveiled a smartphone that illustrated just how hard it has been for the United States to clamp down on China's tech prowess.

The new phone is powered by a chip that appears to be the most advanced version of China's homegrown technology to date -- a kind of achievement that the United States has been trying to prevent China from reaching.

The timing of its release may not have been a coincidence. The Commerce Department has been leading U.S. efforts to curb Beijing's ability to gain access to advanced chips, and the commerce secretary, Gina M. Raimondo, spent much of her trip defending the U.S. crackdown to Chinese officials, who pressed her to water down some of the rules.

Ms. Raimondo's powerful role -- as well as China's antipathy toward the U.S. curbs -- was reflected online, where more than a dozen vendors cropped up on Chinese e-commerce sites to sell phone cases for the new model with Ms. Raimondo's face imprinted on the back. Doctored images showed Ms. Raimondo holding the new phone, next to phrases like "I am Raimondo, this time I endorse Huawei" and "Huawei mobile phone ambassador Raimondo."

Chinese media have referred to the phone as a sign of the country's technological independence, but U.S. analysts said the achievement still most likely hinged on the use of American technology and machinery, which would have been in violation of U.S. trade restrictions.

Beginning in the Trump administration and continuing under President Biden, the United States has steadily ramped up its restrictions on selling advanced chips and the machinery needed to make them to China, and to Huawei in particular, in an attempt to shut down China's mastery of technologies that could aid its military.

For the past several years, those restrictions have curtailed Huawei's ability to produce 5G phones. But Huawei appears to have found a way around those restrictions to make an advanced phone, at least in limited quantities. Though detailed information about the phone is limited, Huawei's jade-green Mate 60 Pro appears to have many of the same basic capabilities as other smartphones on the market.

An examination of the phone by TechInsights, a Canadian firm that analyzes the semiconductor industry, concluded that the advanced chip inside was manufactured by Semiconductor Manufacturing International Corporation of China and was operating beyond the technology limits that the United States has been trying to enforce.

Douglas Fuller, an associate professor at Copenhagen Business School, said SMIC appeared to have used equipment stockpiled before restrictions went into effect, equipment licensed to it for the purpose of producing chips for companies other than Huawei, and spare parts acquired through third-party vendors to cobble together its production.

"The official line in China of a heroic breaking of the technology blockade of the American imperialists is incorrect," Mr. Fuller said. "Instead, the U.S. has allowed SMIC continued significant access to American technology."

Huawei and SMIC did not respond to a request for comment. The Commerce Department also did not respond to a request for comment.

Chinese social media commentators and news sites celebrated the smartphone's release as evidence that U.S. restrictions could not hold China back from developing its own technology.

"Regardless of Huawei's intentions, the launch of the Mate 60 Pro has been imbued by many Chinese netizens with a deeper meaning of 'rising up under US pressure,"' the state-run Global Times said in an editorial.

The phone was released during a week when both American and Chinese officials had issued numerous statements about renewed cooperation and communication. Chinese officials had asked for the United States to roll back its restrictions on chip exports. But Ms. Raimondo -- whose email, along with other U.S. officials, was targeted this year by Chinese hackers -- told reporters that she had taken a hard line on the technology controls in her meetings, saying the United States was not willing to remove restrictions or compromise on issues of national security.

During the trip, Ms. Raimondo and her advisers set up a dialogue to share information about how the United States was enforcing its technology controls. She said the step would lead to better Chinese compliance but was not an invitation to the Chinese to try to water down export controls.

Ms. Raimondo also met directly with the Chinese premier, Li Qiang, during her visit. The week before, Mr. Li had visited Huawei during a visit to southern China, according to the official Xinhua News Agency, and met with the company founder Ren Zhengfei.

The release of the Huawei phone raises questions about whether Ms. Raimondo's department will continue trying to build good will with Chinese officials -- or potentially take a more aggressive stance toward cracking down on China's access to American technology.

The Biden administration is preparing to issue a final version of the technology restrictions it first put out last October, and the revised rules could come within weeks.

Huawei's development of the phone does not necessarily demonstrate a huge leap forward for Chinese technological prowess -- or the total failure of U.S. export controls, analysts said.

Because Chinese firms no longer have access to the most cutting-edge machines for making semiconductors, they have developed novel workarounds that use older machinery to create more powerful chips. But these methods are both relatively time-consuming for manufacturers, and produce a higher proportion of faulty chips, limiting the scale of production.

"This does not mean China can manufacture advanced semiconductors at scale," said Paul Triolo, an associate partner for China and technology policy at Albright Stonebridge Group, a consultancy. "But it shows what incentives U.S. controls have created for Chinese firms to collaborate and attempt new ways to innovate with their existing capabilities."

"It is the first major salvo in what will be a decade or more struggle for China's semiconductor industry to essentially reinvent parts of the global semiconductor supply chain without U.S. technology included," he added.

Nazak Nikakhtar, a partner at Wiley Rein and a former Commerce Department official, said Huawei's progress was "a result of longstanding U.S. policy" -- specifically U.S. licenses that allow companies to continue selling advanced technologies to firms that the Commerce Department placed on a so-called entity list, like Huawei and SMIC.

From Jan. 3 to March 31, 2022, the Commerce Department approved licenses for the sale of $23 billion of tech products to companies on the entity list, according to information released in February by the House Foreign Affairs Committee.

"Where gaps exist in licensing policies, exports will get funneled through the gaps," Ms. Nikakhtar said. "The U.S. government needs to close the gaps if its intention is to limit exports of critical technologies to China."

In a statement on Wednesday, Representative Mike Gallagher, a Wisconsin Republican who heads a congressional committee on China, called for ending all U.S. technology exports to both Huawei and SMIC. U.S. chip makers such as Qualcomm and Intel have received exporting licenses." [1]

1. China Flexes Tech Muscles By Unveiling A New Phone: [Business/Financial Desk]. Swanson, Ana. 
New York Times, Late Edition (East Coast); New York, N.Y.. 07 Sep 2023: B.1.