Why a new Chinese smartphone has sparked panic in Washington

When Beijing officials pleaded with US Commerce Secretary Gina Raimondo for relief from tech sanctions, she held a firm line.

“Of course, I said no,” Raimondo told journalists during her recent trip to China. “We don’t negotiate on matters of national security.”

Yet the power dynamic shifted 48 hours into her visit, when the Chinese sent a message designed to show US officials they did not hold as many cards as they thought.

On August 29, as Raimondo was shaking hands with Li Qiang, China’s premier and de facto number two politician, telecoms giant Huawei announced it was launching a new smartphone – one that appeared to make a mockery of US sanctions.

Containing high-tech chips previously thought to be beyond China’s capabilities, the Mate 60 Pro represents a stunning leap that Donald Trump and Joe Biden’s administrations have spent years trying to prevent.

Huawei’s new phone and its main chip has prompted Chinese state media outlets to brag that America’s policy of “extreme suppression has failed”.

Experts in Washington now fret that Beijing’s efforts to develop its own advanced technology will allow China to make significant leaps forward when it comes to advanced weaponry and artificial intelligence, an area seen as a key battleground for both cybersecurity and information warfare.

Microchips, made from materials known as semiconductors, are used in everything from smartphones to washing machines and even cruise missiles. They will be the linchpin of future technologies too, including artificial intelligence.

The chips in the Mate 60 Pro are thought to have been made by Shanghai-based Semiconductor Manufacturing International Corporation (SMIC), a company that was sanctioned by the US in 2020 for alleged links to “the Chinese military industrial complex”. SMIC denies it works with the military.

The West still has an edge in designing cutting-edge chips, with ally Taiwan seen as the global leader in manufacturing. But there are fears China is catching up, with Beijing seeing chips as central to its plan to dominate a host of technologies globally.

Yang Wang, a senior analyst with Counterpoint Research, says: “If Huawei was indeed capable of developing a 5G capable smartphone, it would have far reaching ramifications for the industry.

“It would signal early success by China to indigenize important parts of the semiconductor value chain, despite US-led sanctions.”

The most crucial factor in any semiconductor is size, or the ability of manufacturers to cram ever more computing power into the same amount of space. On this scale, the size of transistors on the chip are measured in nanometers and the smallest are the most powerful. (A single nanometer is equal to one-billionth of a metre.)

The chips going into Apple’s newest iPhone models, made by Taiwan Semiconductor Manufacturing Company, use a four nanometer processor.

Previously, China was thought to have only mastered 14-nanometer chips at best, while US sanctions restrict the company to importing 16-nanometer technology from the West.

However, Huawei Mate 60 Pro’s small central processor uses a 7-nanometer chip. TechInsights, an American firm that took apart the device to analyse it, said the Huawei phone’s chip was the most advanced it had ever seen from a Chinese manufacturer.

Washington is now scrambling to figure out how the company engineered such a coup.

One answer put forward by a top US lawmaker on Wednesday was illegal sanctions-busting.

“It sure looks like they did,” Michael McCaul, a Republican who chairs the foreign affairs committee in the House of Representatives, said when asked if SMIC appeared to have breached sanctions. He suggested that Congress should launch an investigation.

Jake Sullivan, the US President’s national security adviser, on Tuesday said the White House was seeking “more information.”

Republicans called for Biden to ramp up sanctions on the two Chinese companies after the apparent chip breakthrough. Mike Gallagher, chairman of Congress’ China committee, says: “The time has come to end all US technology exports to both Huawei and SMIC to make clear any firm that flouts US law and undermines our national security will be cut off from our technology.”

Meanwhile, South Korea’s SK Hynix has also opened an investigation to determine how its memory chips ended up in the new Huawei handset. A spokesman told Bloomberg that SK Hynix cancelled all of its Huawei contracts after US sanctions were first imposed on the Chinese company.

When approached on Wednesday by The Telegraph, SMIC declined to comment.

Some analysts believe the SMIC-made 7 nanometer chip may be part of a limited prototype run being used for propaganda purposes.

Experts are sceptical that the manufacturer has truly been able to crack the problem of true mass production, pointing out that Western chip makers took years to master the difficulties of cramming so many transistors onto a tiny sliver of silicon.

However, there are signs that production may be ramping up. Huawei had already been accused of building a string of “secret” factories across China under the names of other companies, in a bid to circumvent American sanctions and import the technology it needed. Huawei has declined to comment on the reports.

At the very least, the Mate 60 Pro is a PR victory for Beijing.

“The resurgence of Huawei smartphones after three years of forced silence is enough to prove that the US’ extreme suppression has failed,” an editorial by the Global Times, a mouthpiece for Beijing, said last week.

“Recently, some American media outlets have been enthusiastic about hyping up things like Huawei is building a ‘secret’ chip factory. Ultimately, these are all due to a failure to see or a refusal to believe in the general trend, and they hold on to outdated thinking that Chinese companies’ technology is all ‘stolen.’

“Essentially, it is Washington’s technological arrogance, and the US will definitely pay the price for this arrogance.”

Dr Mann Virdee, a research fellow in science and technology for the Council on Geostrategy, said: “On the face of it, this is a victory for Huawei and shows that China is successfully growing its domestic chip ecosystem and technical capabilities.

“The fact they have been able to do this is a sign of significant advancement and a blow to US efforts to limit that progress.”

Dan Hutcheson, vice-chairman of TechInsights, says the breakthrough is likely to trigger even tougher sanctions as the Biden administration scrambles to prevent even further advances.

“The result may likely be even greater restrictions than what exist today,” he said.

For now, Chinese nationalists are gloating. Chinese internet users have for the past week joked that Raimondo has become a brand ambassador for Huawei, given the timing of her trip with the launch.

As the Commerce Secretary’s plane departed China last week, that was probably not the image she was hoping to project.