Republican U.S. lawmakers on Friday criticized the Biden administration after sanctioned Chinese telecoms equipment giant Huawei unveiled a laptop this week powered by an Intel AI chip.

China International Supply Chain Expo in Beijing.

The United States placed Huawei on a trade restriction list in 2019 for violating Iran sanctions, part of a broader effort to hobble Beijing's technological advances. Placement on the list means the company's suppliers have to seek a special, difficult-to-obtain license before shipping to it.

One such license, issued by the Trump administration, has allowed Intel to ship central processors to Huawei for use in laptops since 2020. China hardliners had urged the Biden administration to revoke that license, but many grudgingly accepted that it would expire later this year and not be renewed.

Huawei's unveiling Thursday of its first AI-enabled laptop, the MateBook X Pro powered by Intel's new Core Ultra 9 processor, shocked and angered them, because it suggested to them that the Commerce Department had approved shipments of the new chip to Huawei.

“One of the greatest mysteries in Washington, DC is why the Department of Commerce continues to allow U.S. technology to be shipped to Huawei" Republican Congressman Michael Gallagher, who chairs the House of Representatives select committee on China, said in a statement to Reuters.

A source familiar with the matter said the chips were shipped under a preexisting license. They are not covered by recent broad-cased restrictions on AI chip shipments to China, the source and another person said.

The Commerce Department and Intel declined to comment. Huawei did not immediately respond to requests for comment.

The reaction is a sign of growing pressure on the Biden administration to do more to thwart Huawei's rise, nearly five years after it was added to a trade restriction list.

In August, it shocked the world with a new phone powered by a sophisticated chip manufactured by sanctioned Chinese chipmaker SMIC, becoming a symbol of China's technological resurgence despite Washington's ongoing efforts to cripple its capacity to produce advanced semiconductors.

At a Senate subcommittee hearing this week, Kevin Kurland, an export enforcement official, said Washington's restrictions on Huawei have had a "significant impact" on it access to U.S. technology. He also stressed that the goal was not necessarily to stop Huawei from growing but to keep it from misusing U.S. technology for "malign activities."

But the remarks did little to stem frustration among Republican China hawks following the news about Huawei's new laptop.

"These approvals must stop," Republican congressman Michael McCaul said in a statement to Reuters. "Two years ago, I was told licenses to Huawei would stop. Today, it doesn’t seem as though the policy has changed."

Huawei continues its comeback from U.S. blacklist, unveiling a new laptop with a homegrown OS and AI—and an Intel processor

Huawei, the U.S.-blacklisted Chinese tech giant, unveiled several new products on Thursday, capitalizing on surging consumer and business interest in its technology.

Months after surprising China with its Mate 60 Pro smartphone, which features a controversial homegrown processor, Huawei unveiled a new premium AI-capable laptop—powered by a processor from a U.S.-based partner.

The MateBook X Pro, the newest version of Huawei’s laptop, includes Intel’s Core Ultra 9 processor, the U.S. company’s first made using the extreme ultraviolet lithography equipment used to make the most advanced chips, according to Nikkei Asia.

The laptop also uses two pieces of Huawei-developed software: the operating system HarmonyOS and the AI large language model Pangu. The MateBook will cost 14,999 yuan ($2072)

Intel’s ties to Huawei

Huawei’s return to the premium consumer market is a marked change from just a few years ago when the company was struggling to survive in the face of severe U.S. sanctions.

The Trump administration stopped Huawei from getting access to advanced processors, forcing the company to suspend production of its premium products.

Yet Huawei got a lifeline from Intel, which reportedly received a license from the Trump administration to continue selling laptop processors to the Chinese company.

Intel’s competitors, led by AMD, are pressuring the Biden administration to revoke this permission, Reuters reported earlier this year.

An internal AMD presentation reportedly claimed that Intel now provides 90.7% of Huawei’s laptop processors in the first six months of 2023, up from 52.9% in 2020. AMD’s share, by comparison, dropped from 47.1% to just 9.3%.

China contributed about a quarter of Intel’s sales last year, making it the chipmaker’s largest market, even ahead of the U.S.

Still, Intel might be hit by regulatory scrutiny from Beijing, which is trying to reduce its reliance on foreign-sourced technology.

Late last year, regulators ordered government departments to phase out their use of computers using foreign chips.

And on Friday, the Wall Street Journal reported that China’s Ministry of Industry and Information Technology will order telecoms companies to stop using foreign processors by 2027.

Comeback

Huawei is pushing its way back into China’s tech sector with an array of homegrown, high-end products.

The company’s most high-profile debut was the Mate 60 Pro, released last year. The 5G smartphone features an advanced processor just a few generations behind the current cutting-edge. State media hailed the phone as a triumph for China’s tech industry. Chinese consumers, too, flocked to the new phone, sending Huawei’s sales up 64% year-on-year over the first six weeks of 2024.

Huawei is also developing its own AI chips, much like the processors from Nvidia that help train AI models. Chinese customers are reportedly turning to Huawei’s processors due to fears that the U.S. could expand its controls on chip sales to China.

Finally, Huawei is trying to break into China’s fiercely competitive EV sector, like its tech rival Xiaomi. The company sells hardware and software to Chinese automakers, and also designs and markets its own cars, often in joint ventures with an existing carmaker.

On Thursday, Huawei announced a new version of its Luxeed S7 EV, developed in partnership with Chinese carmaker Chery, following months of supply shortages.

All these new products are helping Huawei's bottom line. The company said it had 87 billion yuan ($12 billion) in net profit for 2023, a 144% year-on-year increase.

China reportedly orders state-owned mobile carriers to replace foreign chips

It will most likely cause heavy losses for Intel and AMD.

Back in 2019, the FCC banned US carriers, which were then starting to deploy their 5G networks, from using subsidies to buy equipment from companies deemed a national security threat. Chinese manufacturers Huawei and ZTE were at the top of that list. Now, China is implementing a similar measure: According to the Wall Street Journal, the Ministry of Industry and Information Technology has ordered state-owned mobile operators, including the two biggest carriers in the country, to phase out foreign chips.

The regulator has reportedly told China Mobile and China Telecom, along with all other state-owned carriers, to check their networks for any semiconductors that weren't manufactured locally. It then asked them to determine a timeline to replace them. The Journal's sources said that it's now possible to switch to domestic chips, thanks to improvements in their quality and performance over the past few years. Chinese companies like Huawei were forced to design their own semiconductors after getting hit by trade sanctions, in order to be self-sufficient and in case they're no longer able to import chips from the US and its allies. The Chinese government, in turn, is supporting their efforts and is raising $40 billion in funds to help the domestic semiconductor industry.

 

This latest move by China follows its ban on the use of Intel and AMD processors in government computers. Prior to that, China also prohibited the use of US-made tech in all government institutions and public bodies and banned local firms from buying chips made by US memory manufacturer Micron Technology. Intel and AMD will most likely suffer heavy losses from this latest development, since they provide most of the chips used for mobile networks around the world. China was also Intel's largest market in 2023 and accounted for 27 percent of its revenue. In addition to losing some of their biggest customers, the companies will now have to face competition from Chinese manufacturers, as well.