Taiwanese companies could help Huawei break the sanctions blockade

A number of Taiwanese technology companies could be involved in setting up chip manufacturing infrastructure in southern China for Huawei. Such suspicions became known on October 3 after a publication by Bloomberg.

Media journalists conducted surveillance in August 2023 at construction sites near the city of Shenzhen, where Huawei is headquartered. In particular, they noticed that workers at one of the sites of the US-sanctioned company Pengxiwei IC Manufacturing (PXW) were wearing protective vests from the Taiwanese company Topco Scientific and its subsidiary L&K Engineering.

PXW was featured in a previous Bloomberg report on Huawei’s evasion of US sanctions on August 23. Then it was reported that since the end of 2022, Huawei has been allegedly secretly financed by several chip manufacturing companies with money allocated by the Chinese government (Quindgao Si’En, Shenzhen Pensun Technology, SwaySure and Fujian Jinhua were also on the list).

Topco confirmed that it is indeed represented in China, but is engaged there exclusively in creating a wastewater filtration system, which does not violate sanctions. Representatives of a subsidiary of the Taiwanese United Integrated Services were found at the plant of SwaySure, also allegedly associated with Huawei. As evidence of the alleged involvement of a fourth Taiwanese company in Huawei’s successes, Cica-Huntek Chemical Technology Taiwan Co. Its website says it has won contracts to build chemical supply systems for two Chinese chip makers, Shenzhen Pensun and PXW.

Soon after clarification from journalists, information about this was removed from the Taiwanese company’s website. Following the release of the information, Cica-Huntek shares fell 2.6%, while Topco and United Integrated shares closed 1.5% lower in Taipei trading.

Finally, at one of the PXW factories in August, a tank truck with the logo of the French Air Liquide, which specializes in technical gases, was spotted. They also assured that they do not violate any of the current American restrictions with their activities in China. However, the agency’s journalists themselves are also in no hurry to draw clear conclusions about whether Taiwanese companies are violating US sanctions, since they only block the export of American technologies, and do not prohibit doing any business with Huawei.

Such Taiwanese-Chinese cooperation also has political implications ahead of the presidential elections that will determine the future of the island in January 2024. The two main contenders for the post are William Lai from the Democratic Progressive Party (DPP), which is seeking complete independence from the PRC, and Hou Yui from the more inclined to a compromise with the Beijing Kuomintang.

Taiwan’s Economy Minister Wang Meihua, commenting on the Bloomberg investigation, said that the island’s authorities will study the activities of these four companies in China. In 2022, Taipei promised to work with the United States and its other allies to prevent cutting-edge technology from falling into the hands of the Chinese military.

Prior to this, in September, TechInsights engineers, at the request of Bloomberg, disassembled the flagship smartphone Huawei Mate 60 Pro and studied its components. The main conclusion was that the company has learned to circumvent the strict US sanctions in force against it since 2018. It is also for this reason that the US Department of Commerce is now trying to understand how Huawei continues its development in the field of semiconductors.

Very developed trade and economic ties have been maintained between the two sides of the Taiwan Strait for many years, even despite the current political tensions, says Andrei Karneev, head of the School of Oriental Studies at the National Research University Higher School of Economics. Therefore, it cannot be ruled out that some Taiwanese entrepreneurs even decided to engage in sanctioned activities in the PRC.

At the same time, the expert admits that the Bloomberg publication itself, in the conditions of the information war, did not have the goal of reflecting reality. The current government of Taiwan (DPP) strives for the independence of the island, but it would be quite difficult for it to somehow convince local businesses not to cooperate with this or that PRC company, Karneev concludes.

It is quite possible that Taiwanese and French businesses were simply looking for an opportunity to make money in another non-prohibited way, says Maxim Koposov, General Director of Promobit. Everything described in Bloomberg does not violate any sanctions, he believes.