Taiwan Tech Players Involved In Huawei's Covert Chip Production: Report

Tech firms based in Taiwan are aiding Huawei Technologies Co. in their clandestine endeavors to develop chip manufacturing plants in southern China, potentially stirring up diplomatic tensions.

What Happened: A probe conducted by Bloomberg has uncovered that Taiwanese firms, including a division of Topco Scientific Co. and a subsidiary of L&K Engineering Co., aided Huawei-related construction sites in Shenzhen in August. The workers from these Taiwanese companies were identifiable through their safety vests bearing employer branding.

United Integrated Services Co., a firm specializing in construction, had its employees present at another Huawei-associated site. Cica-Huntek Chemical Technology Taiwan Co. had previously disclosed that it had won contracts to establish chemical supply systems for two Chinese chip manufacturers, Pengxinwei IC Manufacturing Co. and Shenzhen Pensun Technology Co., both associated with Huawei. The company subsequently deleted the online disclosure.

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Why It Matters: The undisclosed involvement of Taiwanese firms in Huawei’s operations could spark a backlash in Taiwan, which is gearing up for elections in January. The increasing threats from China for military action against Taiwan over its independence contemplations exacerbate the controversy of this collaboration.

Additionally, with the U.S. imposing sanctions against Huawei, the indirect assistance provided by Taiwanese firms to the Chinese tech behemoth in bypassing these sanctions remains significant. The U.S. sanctions were recently put into question when Huawei launched a smartphone equipped with a chip manufactured in China, which raised alarm in Washington.

The spotlight on smartphone chips has become a focal point in the ongoing tech rivalry between the United States and China, symbolized by the industry giants Apple Inc. AAPL and Huawei.

Recent examinations of the domestically-produced processor within the Huawei Mate 60 series have unveiled the integration of 5G capabilities, a development that has raised concerns in Washington.

Traditionally, global smartphone manufacturers have heavily depended on suppliers such as Skyworks Solutions Inc. SWKS and Qualcomm Inc. QCOM for their wireless communication chip requirements.

Taiwan Looks Ahead

The Ministry of Economic Affairs in Taiwan has committed to scrutinizing the relationship between the four Taiwanese firms and Huawei.

The U.S. Commerce Department, while not commenting on this issue, has previously indicated that it is evaluating the reported advancements by Huawei in chip technology.

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