US restrictions on chips to backfire, experts warn

The US restrictions on the export of purely civilian semiconductor products to China and cutting supplies to specific Chinese companies are typical economic coercion practices, which not only violate WTO rules but also seriously harm the interests of American companies, officials and experts said.

The comments came after foreign media quoted anonymous sources as saying that the US government has revoked licenses that allowed companies including Intel and Qualcomm to ship chips used for laptops and handsets to Chinese tech company Huawei Technologies.

The spokesperson of the Ministry of Commerce said in a statement on Wednesday night that the reported US practices seriously contradicts its commitments of not seeking decoupling with China and not impeding China's development, and are in direct contradiction to its claim of "precisely defining national security".

China will take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies, the spokesperson added.

Wei Jianguo, former vice-minister of commerce, said: "Despite Washington's shift in rhetoric from decoupling to de-risking in key supply chains, the US government continues to tighten its controls over chip exports to China."

"The move is the latest evidence that to contain China's technological rise, the US government is leveraging all means, regardless of how much pain it will cause US companies," Wei said.

Xiang Ligang, director-general of the Information Consumption Alliance, a telecommunications industry association in China, said the US chip restrictions will accelerate Chinese companies' efforts to achieve technological breakthroughs.

For instance, Huawei's AI processors became highly sought-after products in China after restrictions were imposed on the export to China of US company Nvidia's most advanced AI chips, Xiang said.

Meanwhile, despite Washington's prolonged curbs on Huawei, the Chinese tech company has managed to significantly grow its revenue and profits in Q1 of 2024.

Huawei's revenue for Q1 of March rose about 37 percent to 178.5 billion yuan ($24.7 billion), while its net profit leapt 564 percent to 19.65 billion yuan.

Though the company did not disclose the reason for the jump, analysts said that it was partly driven by its strong comeback in the domestic smartphone market.

Huawei returned to the top one position in the Chinese smartphone market from January to March after 13 quarters, holding a 17 percent market share, driven by the success of its Mate and nova series, according to market research company Canalys.

In this quarter, Huawei shipped 11.7 million smartphones, a remarkable 70 percent increase from a year earlier. This resurgence is notable, given the challenges the company faced due to US sanctions, which led to a major reorganization of its phone business, Canalys added.

Huawei is returning to the international smartphone market in a low-key manner. The Chinese company has made the global debut of its latest Pura 70 series outside of China, starting in Malaysia earlier this month. The Pura 70 series are now also available for pre-sales in a few European countries such as Germany.

Analysts said Huawei will ramp up aims to regain its share in overseas markets this year, as long as its production capacity of smartphones can be guaranteed.