Huawei believed to be building secret microchip factories to beat US sanctions

Chinese tech giant reportedly backed by Beijing government amid rising tensions with West

Huawei is secretly building a network of microchip factories that could allow it to bypass US sanctions, a trade body has claimed.

The Chinese technology giant has reportedly received as much as $30bn (£23.7bn) from the Beijing government to build local plants, which comes amid a deepening trade war with US President Joe Biden.

Huawei, which is one of China’s leading tech companies, has been under US sanctions since 2019 after White House officials deemed its equipment a spying risk.

The company has since shifted into chip production and will be boosted by the estimated $30bn investment from the state.

China has reportedly backed Huawei’s high-tech capabilities despite sanctions as the country looks to become self-sufficient in semiconductors.

The Semiconductor Industry Association, which is based in Washington DC, said in a recent presentation seen by Bloomberg that Huawei has acquired two chipmaking plants and is building three others.

The plants are allegedly being operated by businesses without Huawei’s name or branding, creating an opaque supply chain that could hinder US attempts to block exports of chipmaking equipment to sanctioned companies.

A Huawei spokesman declined to comment.

Huawei has been subject to increasingly harsh restrictions in recent years and most US companies are now blocked from doing business with it.

The company is at the heart of the US-China trade war after President Biden prioritised restrictions on China’s tech sector to make it harder for domestic companies to purchase the most advanced semiconductors.

In October, the US went further and blocked the sale of manufacturing technology used to build artificial intelligence microchips over claims they could be put to military use.

Chinese companies can still buy less advanced technology for chip plants, although sales to Huawei require export licences that are rarely granted by US officials.

Amid the US ban, Huawei has been developing in-house microchips and building its own software to enable semiconductor design.

In its presentation, the Semiconductor Industry Association found five factories backed by Huawei.

To combat US sanctions, China has been ramping up domestic subsidies worth tens of billions of dollars.

The country is still some years behind the US, Japan and Taiwan, but local companies are working towards more advanced microchips, which are smaller and more powerful.

The US Department of Commerce said: “It is no surprise that they have sought substantial state support to attempt to develop indigenous technologies.

“BIS [Bureau of Industry and Security] is continually reviewing and updating its export controls based on the evolving threat environment and, as evidenced by the October 7, 2022 rules, will not hesitate to take appropriate action to protect US national security.”