The Chinese tech giant is backing a startup in Shenzhen that has ordered chip-making equipment, adding foreign suppliers, for a semiconductor production plant, according to other people familiar with the matter. The new company, Pengxinwei IC Manufacturing Co. , is run by a former Huawei executive and involves construction services near Huawei’s headquarters, according to public records and satellite photographs.
Huawei is expected to buy most, if not all, of its production, said other people, who asked not to be known as they discussed personal information. PXW, as the company is known, plans to take delivery of the device as soon as the first part of 2023, one of the other people said.
If it manages to take off, the startup could allow Huawei to circumvent Washington’s efforts to stifle the supply of chips to a company it considers a military and economic threat. Huawei representatives declined to comment.
The low-key PXW has already caught the attention of the U. S. Department of Commerce’s Bureau of Industry and Security. The U. S. Department of Agriculture, which is helping to oversee U. S. industrial restrictions. U. S.
The branch is aware of the startup and the “allegations of relationships with Huawei,” the BIS said in response to a request from Bloomberg News. the list of entities such as Huawei, and uses open-source, proprietary and classified data to enforce our administrative or fraudulent laws, as well as regulatory teams to fight infringements and, where appropriate, enforce them. “
It is unclear whether PXW’s strategic plans explicitly violate U. S. industry sanctions. UU. Si the company intends to hire Huawei, it would be severely limited in the chip-making apparatus it can buy from U. S. suppliers. U. S. It has more leeway to acquire machines from foreign suppliers such as ASML Holding NV and Tokyo Electron Ltd. , possibly also wanting to seek U. S. approval. U. S. depending on the amount of U. S. generation is available. U. S. infused into the products sold.
PXW said in a statement that it has agreements with suppliers and aims to start production in 2025, without mentioning customers. The company plans to start work on its 28-nanometer generation, six generations behind complex maximum production, next year. said a user familiar with his strategy.
Huawei, perhaps more than any other company, has been at the center of tensions between the U. S. and China. The U. S. government and Trump China. La’s management blacklisted the company in 2019 and has pressured allies such as the U. K. and Japan to remove its telecommunications device over fears it could be used for espionage and espionage. The standoff has intensified with efforts to prosecute Huawei’s chief financial officer, the daughter of founder Ren Zhengfei, for fraud. (Meng Wanzhou, who has denied wrongdoing, allowed Canada to leave for China last year under a deferred prosecution agreement. )
Huawei has paid a heavy price. Before the blacklist, the company was the world’s largest supplier of cellular communications devices and competed with Apple Inc. and Samsung Electronics Co. in the smartphone sector. Its chip design unit, HiSilicon, was the cornerstone of China’s attempts to identify a colorful domestic semiconductor industry. The actions have driven Huawei out of many overseas markets, forced it to sell its customer phone business and cut off access to chips critical to its success. in the face of U. S. sanctions.
PXW won’t be to build a chip-producing business that lives up to the functions of Taiwan Semiconductor Manufacturing Co. , the industry leader it once provided to Huawei. But the startup may help Huawei regain ground in several critical areas, such as smartphones and servers. It’s unclear whether the company uses HiSilicon’s assets, intellectual assets or people.
President Joe Biden’s administration is preparing new restrictions on China’s access to chip generation that can only PXW and similar cases. The Commerce Department plans to implement a set of regulations this week to tighten restrictions on semiconductor technologies that can be exported to China, other people familiar with the matter said.
The government EE. UU. va beyond blacklisting individual corporations such as Huawei and Semiconductor Manufacturing International Corp. In favor of imposing broad limitations on all Chinese corporations, adding a ban on buying synthetic intelligence chips. The White House also has an executive order to limit U. S. investment. Technology corporations.
“We got used to a ‘sliding scale’ technique that said we only had to stay a few generations ahead. That’s not the strategic environment we’re in today,” Jake Sullivan, the U. S. national security adviser, said last month. The nature of certain technologies, such as complex logic and memory chips, we want to move forward as much as possible. “
In China, the Huawei episode boosted the Communist Party’s efforts to build a domestic semiconductor industry, a long-standing purpose for competing more with the United States on complex technologies. The government has invested tens of billions of dollars in the sector. invested in more than 40 chip-related companies, according to a report by Berenberg Bank.
“Although Huawei has no production facilities at this time, it will be one of the major corporations in the growth of China’s semi-industrial industry due to its end-market products such as networking, synthetic intelligence computing, cloud, smartphones, IoT and automation,” Tammy Qiu wrote. Berenberg analyst, in the September report.
PXW is subsidized by the same Shenzhen city government that helped take over Huawei’s Honor smartphone department in 2020. The startup acquired enough land in the city to cover more than 30 soccer fields in December and paid 158 million yuan ($23 million), according to the data. about the acquisition of the land and its own website. Satellite photographs show that the site’s buildings are almost finished, but what is clear is what apparatus will be installed internally and where the machines will come from.
The market for chip production devices is governed by five corporations: ASML in the Netherlands and Tokyo Electron in Japan, as well as Applied Materials Inc. In the U. S. , KLA Corp. and Lam Research Corp. they are subject to complex regulations that limit what they can sell to Huawei and other Chinese consumers. In general, U. S. corporations cannot sell gadgets to Chinese consumers more complex than 14 nanometers, 4 generations the newest technology. Usa. U. S. Corporations cannot sell anything to Huawei without a special license.
Applied Materials is not the source of the Chinese start-up, according to a user familiar with the matter. Representatives for Applied and Lam Research declined to comment on PXW. The KLA said it complies with U. S. industry regulations. Subsidiaries.
ASML, which dominates the lithography market, declined to say whether it works with PXW and said it’s up to consumers to disclose to their suppliers. A Tokyo Electron representative said the company had heard of PXW.
PXW aims for production at 14 and 7 nanometers, less complex than the functions of corporations such as TSMC and Samsung, but remains a challenge for Chinese chipmakers, according to a user familiar with its plans. It’s unclear how PXW could protect those technologies.
Outside the U. S. U. S. states like ASML and Tokyo Electron are in troubled territory when it comes to being blacklisted by the US. According to Judith Alison Lee, wife of Gibson Dunn Law Firm
“Manufactured items can incorporate a minimum amount of U. S. -origin content,” typically 25 percent, without being subject to restrictions, he said.
Kevin Wolf, former senior BIS official and now spouse at Akin Gump Strauss Hauer
“Non-U. S. corporations must get caught up in any of Huawei’s specific rules,” he said.
However, the Biden administration’s new restrictions may also replace that. They could prevent foreign companies from selling chip-making devices to Huawei suppliers if those companies use U. S. parts or software. U. S.
PXW has hired several senior engineers from chip giants, adding Hua Hong Semiconductor Ltd. of China and Taiwanese company United Microelectronics Corp. , according to a recruitment video posted on Liepin’s task board. It also recruited engineers from Hongxin Semiconductor Manufacturing Co. , a $20 billion chip allocation that collapsed in late 2020, according to a user familiar with the matter. The startup aims to succeed at a capacity of 20,000 wafers by 2025, the company said on its website, without specifying the timeline.
A Chinese foundry capable of making 14nm chips may be enough for Huawei. Many parts of network appliances (transceivers, application-specific embedded circuits, and switching chips) are manufactured with this technology.
Although Huawei’s smartphone business has been affected by U. S. sanctions. In the U. S. , it has yet to expand its telecommunications infrastructure business. TSMC left Huawei as a visitor in 2020, cutting off access to a key production partner for chips moving into phones and servers.
PXW can simply reopen the source channels, the other people said, if Washington doesn’t take further action. The EE. UU. se Bureau of Industry and Safety declined to say whether it had approved or rejected licenses from any device manufacturers to obtain PXW.
Taiwan’s Ministry of Economic Affairs said that PXW has not been included in its list of entities for high-tech exports, no Taiwanese company has reported shipments to the Chinese chipmaker in the past 3 years. The ministry added that Taiwan is stepping up its efforts to crack Chinese corporations that hunt Taiwanese talent.
PXW describes itself as an emerging chip manufacturer by contract. Its first factory, designated by the government as a strategic structure project, aims to make chips used in cars, Internet of Things devices and phones, according to the company’s website.
The company intends to expand its own technologies because of “American hegemony” that has forced China to find its own alternatives, a PXW worker said in a recruitment video. The purpose is to make PXW a contract chip production giant comparable to TSMC or SMIC, China’s largest chip producer, a worker said in the video.
Huawei will work with domestic chipmakers, adding those in Qingdao, Shenzhen, Beijing and Shanghai to get the parts it needs, Berenberg’s Qiu said in the September study note.
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