The Commerce Department Bureau of Industry and Security is “aware of” reports Huawei is attempting to circumvent U.S. restrictions on semiconductor exports to the company by providing money for Chinese startup Pengxinwei (PXW) IC Manufacturing to build a chip manufacturing plant in Shenzhen that’s expected to largely distribute its products to Huawei, a department official said Tuesday. Senate Intelligence Committee Vice Chairman Marco Rubio of Florida and four other GOP senators urged President Joe Biden Monday to “halt” the PXW construction plans (see 2210170078) and Commerce is “working with the White House” to respond to those concerns, a spokesperson said: “BIS is conducting a review of existing policies related to China and will potentially seek to employ a variety of legal, regulatory, and, when relevant, enforcement tools to keep advanced technologies out of the wrong hands.” The bureau is “taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and end-users to protect U.S. national security and foreign policy interests,” the spokesperson said.
Chip export news
Senate Intelligence Committee Vice Chairman Marco Rubio of Florida and four other Republicans urged President Joe Biden Monday to “take immediate action to halt” Huawei’s attempt to circumvent U.S. restrictions on semiconductor exports to the company by providing money for Chinese startup Pengxinwei (PXW) IC Manufacturing to build a chip manufacturing plant in Shenzhen. The GOP senators in a letter to Biden cited reports Huawei would likely buy most of the semiconductors made at the new factory, which would have capacity to produce chips of up to 14 nanometers. The first chips are expected to be available in the first half of next year. The other signers are: Marsha Blackburn of Tennessee, Tom Cotton of Arkansas, Ted Cruz of Texas and Bill Hagerty of Tennessee. “This would represent a dangerous leap in Chinese semiconductor manufacturing, as Chinese chipmakers have thus far only been able to produce 7-nanometer chips in limited quantities,” the senators wrote Biden. “With these new chips for its base stations, Huawei could resume its march towards 5G market dominance,” and the Chinese Communist Party “will advance its plan to control global telecommunications and extend its economic espionage and repression.” The lawmakers said they’re “deeply concerned that, despite the obvious threat that PXW poses, your administration has taken no official steps to delay the project’s progress, despite being aware of the project for some time.” The Bureau of Industry and Security’s “apparent inaction” in not already placing PXW on its entity list “is a dereliction of duty” given the company’s “clear connection with Huawei,” the Republicans said: “As far as we can tell, Commerce has not sent a single ‘informed’ letter to any entities potentially working with PXW, ordering them to halt all shipments to and transactions with the factory.” BIS and Huawei didn’t immediately comment.
A Bureau of Industry and Security official confirmed the agency sent letters to specific companies restricting their ability to export certain artificial intelligence-related chips to China, and said more restrictions may be coming. In the agency’s first public comments on the matter, Thea Kendler, BIS assistant secretary-export administration, said the agency hopes the letters help inform industry about the types of exports the agency is scrutinizing.
Design activity in the semiconductor industry remains robust, notwithstanding the market’s “normal ebb and flow,” said Synopsys CEO Aart de Geus on an earnings call Wednesday for fiscal Q3 ended July 31. The provider of electronic design automation services was one of the few tech companies in recent quarters to upgrade its forecast, saying it now expects revenue of $5.06 billion to $5.09 billion for the fiscal year ending Oct. 31. At the high end of the range, revenue would be $90 billion higher than in the May 18 forecast. The guidance assumes no further changes in the Commerce Department’s entity list of export restrictions, said the company. Semiconductors “have transformed every aspect of our world” over the past five decades, said de Geus. “As a result, not only does the world demand more chips, but more chips are being designed by an expanded group of semiconductor and systems companies,” he said. “Those chips are much more complex. They need to be designed faster due to time-to-market pressure and with increasingly constrained engineering talent resources.” Demand is “particularly high” in markets such as high-performance computing, AI and machine learning, automotive and mobile, “where systems are fueled by smart everything, high-speed and secure connectivity and advanced process geometries,” he said.
Buoyed by congressional passage of the Chips Act (see 2207280060), the U.S. through 2025 will have the world’s highest growth rate in advanced nodes of wafer production, defined as 7 nanometers and below, when its share is expected to rise to 12%, from negligible share in 2022, reported TrendForce Monday. Chinese foundries are more active in expanding the production capacity of mature processes, 28 nanometers and above, “under the constraints of existing equipment” available under the Commerce Department's entity list and its export restrictions, it said. The increasing restrictions on China under the Chips Act could lead to rising "geopolitical risk," said the company. Beijing is "firmly against" provisions in the Chips Act that "restrict normal sci-tech cooperation between China and the U.S.," said a Chinese Foreign Affairs Ministry spokesperson after the legislation cleared the Senate last week. "China-U.S. science and technology cooperation serves the interests of both sides," said the spokesperson.
The Commerce Department Bureau of Industry and Security is reviewing the types of semiconductors and chipmaking equipment that can be exported to China to determine whether it needs to tighten those restrictions, said BIS Undersecretary Alan Estevez. Speaking during a Senate Banking Committee hearing Thursday, Estevez said the agency is considering tightening the “cut-off point” of semiconductors that are subject to strict export licensing requirements.
The U.S.-China competition will be the “geopolitical challenge for this generation,” Cordell Hull, principal at WestExec Advisors, told an online symposium Thursday on Indo-Pacific geopolitics hosted jointly by the Asia programs of the Foreign Policy Research Institute (FPRI) and the Wilson Center. Hull hopes the competition "can be managed,” and that it “doesn’t lead us into places where neither country really wants to go,” he said.
Commerce Secretary Gina Raimondo and some Senate Commerce Committee members used a Wednesday hearing on the Commerce Departments FY 2023 budget goals (see 2204210059) as a platform to press Congress to move swiftly to reach an agreement marrying elements of the House-passed America Creating Opportunities for Manufacturing, Pre-Eminence in Technology and Economic Strength Act (HR-4521) and Senate-passed U.S. Innovation and Competition Act (S-1260). Committee members also pressed Raimondo on NTIA’s plans for distributing $48 billion in broadband money from the Infrastructure Investment and Jobs Act and how to improve interagency spectrum coordination.
Sen. Todd Young, R-Ind., and Rep. Doris Matsui, D-Calif., expressed optimism Monday that Congress can begin conference negotiations on its China package before the end of the work period, as planned by Senate leadership (see 2203140059).
Q4 revenue at China’s largest chipmaker, Semiconductor Manufacturing International Corp., jumped 61.1% year over year to $1.58 billion, and its quarterly profit increased 212.7% to $552.8 million, despite being added to the Commerce Department’s entity list in December 2020 (see 2012180026), reported the company Thursday. It was an “exceptional year in SMIC's development history,” it said. The global shortage of chips and the strong demand for “local and indigenous manufacturing” brought SMIC “a rare opportunity,” while the U.S. export restrictions of the entity list “set many obstacles to the Company's development,” it said.