US Lawmakers Demand Tougher Action On Huawei's Secretive Chip Network

Rep. John Moolenaar (R-MI) and Rep. Raja Krishnamoorthi (D-IL) have called on the U.S. Department of Commerce to crack down on Huawei Technologies over its alleged efforts to sidestep U.S. sanctions through a hidden network of semiconductor facilities.

What Happened: In a recent letter to Commerce Secretary Gina Raimondo, the lawmakers emphasized the need to limit the flow of U.S. semiconductor manufacturing equipment (SME) to Huawei.

The letter warns that Huawei is leveraging companies like Pengxinxu, SwaySure Technology, and Qingdao SiEn, among others, to bypass existing restrictions on its chip-making capabilities. Although PXW Semiconductor, a related entity, was previously added to the Commerce Department's Entity List, the lawmakers suggest similar action may be needed for its sister companies due to their ties to Huawei.

The appeal to tighten export controls comes as Huawei continues to build out its semiconductor production capacity, allegedly using firms not currently blacklisted by the U.S.

The letter highlights the influence of the Shenzhen government-backed Shenzhen Major Industrial Investment Group Co., Ltd., which reportedly oversees both PXW and its affiliates, like SwaySure. The lawmakers believe adding these companies to the Entity List would limit Huawei's access to U.S. technology.

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Why It Matters: The pressure on Huawei coincides with reports that ByteDance, the parent company of TikTok, may use Huawei's Ascend 910B chips for a new AI model. The company turned to domestic chips amid U.S. export restrictions, shifting away from reliance on advanced AI chips from Nvidia Corp. (NASDAQ:NVDA). ByteDance has reportedly been ramping up its efforts to develop AI processors in response to these limitations.

On Tuesday, ASML Holding N.V. (NASDAQ:ASML) projected that China’s contribution to its revenue would normalize at 20% next year, down significantly from 49% in the June quarter, reflecting shifting dynamics in the semiconductor market. An accidental early earnings release revealed the company’s lowered sales forecast for 2025. This announcement also led to a broader sell-off in semiconductor stocks, although peers like Nvidia Corp., Advanced Micro Devices, Inc. (NASDAQ:AMD), and others managed slight rebounds.

ASML’s CEO noted cautious customer sentiment amid a challenging market, as the sector faces further pressure from potential U.S. restrictions on AI chip sales.

What’s Next: Tightening restrictions on Huawei's chip-making capabilities would align with broader U.S. efforts to curb China’s access to advanced technology. The lawmakers argue that this step is essential to prevent national security risks posed by Huawei's expanding semiconductor ambitions.

The lawmakers' push for further actions marks the latest development in a broader U.S. strategy to counter China's advances in the tech sector, with implications for companies across the global semiconductor supply chain.

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