Taiwan firms reportedly aiding Huawei navigate chip sanctions

Chinese tech developer Huawei unveiled its Mate 60 Pro smartphone last month, said to feature a high-end computer chip made in China. As the U.S. investigates the origins of the Mate 60 Pro's chips, Taiwanese tech firms have reportedly been assisting the phone maker navigate sanctions through covert chip plants, according to a Bloomberg report.

Yahoo Finance Tech Editor Dan Howley breaks down the broader implications these chip operations may have, especially if contracted and acquired by the Chinese government.

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Video Transcript

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SEANA SMITH: China tech giant Huawei may be getting a leg up on its chip-making thanks to a group of Taiwanese tech companies, and this is according to a report from Bloomberg. Now, Huawei recently rang alarm bells in Washington when it did reveal a new smartphone last month complete with an advanced made-in-China chip. So let's talk about what this collaboration with Taiwan could mean for the tech giant and also why a China-made smartphone chip is so alarming to officials in Washington. With that and more, Yahoo Finance's Dan Howley. Dan.

DAN HOWLEY: That's right, Seana. Let's start off with why this might be alarming. This is a smartphone. It's from Huawei, yes, but why is this such a big deal? Well, it's because the US tried to put these restrictions in place to stop Huawei from even being able to put these kinds of phones together. Right now we're talking about the Mate Pro 60 is the device that they're putting this new chip into.

And basically it's a 7 nanometer process. That means it's a relatively high-end chip for the company itself. And really, you know, the fact that they were able to do this seemingly with only the technology that is available to them with US export controls in place is quite impressive.

Now, here comes the Taiwan part of that. There are Taiwanese companies that are working with Huawei or alleged to be working with Huawei who could be providing them with the kind of know-how they need to get these kinds of technologies out the door. So why does that matter to the US, and why is it such a big deal?

Well, the idea is that if they have these kinds of chips, they have these kinds of processors, they'll be able to eventually trickle their way down into the Chinese military. And so because of that risk, that's why the US originally tried to cut off Huawei from the use of any kind of US-made tools or processes to get these chips off the ground. And so the fact that there's potential involvement from companies in Taiwan is quite a big deal, especially given the relationship between Taiwan and China and China continually kind of saber-rattling towards Taiwan.

SEANA SMITH: And Dan, this also just gets to the heart of the issue, right, the back and forth that we've seen between the US and China just in terms of the tech war that's been playing out, what's happening specifically when it comes to chips. And there was a report out from Reuters yesterday talking about the fact that we could see even more updated export curbs in October, so later this month. What are we learning there, and I guess what do you think this signals just in terms of the escalation that we've seen in this back and forth between China and the US?

DAN HOWLEY: Yeah, obviously, any addition to this is an important topic for both the US and China. Likely this has to do with AI controls, ensuring that China doesn't get the kind of access to AI that the US does. As far as how it's coming out, according to this report, the US gave China a heads up basically saying, look, we're going to be putting these into place. It's our way of protecting ourselves, but we don't want it to be a surprise to you guys. And so they're doing that.

I think it's important to point out, though, that when it comes to China and, you know, any country, there is a certain degree of corporate espionage that goes on. There's, you know, different ways that companies are able to access other companies-- rival companies- information to get data on protected, copyrighted, or, you know, restricted materials. And so that's something that these companies-- if not the companies themselves, then perhaps entities that work with them could be capable of doing. Not saying that they are, but it's something that's worth pointing out.

And so, you know, it's not just the idea that the US cuts off access to technologies. There's also other ways around that that aren't exactly up to snuff most of the time. So, you know, there's multiple ways that any company-- obviously not saying that this is about Huawei, but there are ways that some companies can get around this kind of idea of these export controls and needing the know-how to put these kinds of chips together.