How is Intel able to sell chips to China’s Huawei when other firms can’t?

The recent boom in artificial intelligence (AI) has created a surge in demand for chips across the globe.

How is Intel able to sell chips to China’s Huawei when other firms can’t?
The logo for the Intel Corporation is seen on a sign outside the Fab 42 microprocessor manufacturing site in Chandler, Arizona, U.S., October 2, 2020. REUTERS/Nathan Frandino//File Photo/File Photo

The backstory: The recent boom in artificial intelligence (AI) has created a surge in demand for chips across the globe, with companies like Intel, Taiwan Semiconductor Manufacturing Company (TSMC), Advanced Micro Devices (AMD) and Nvidia racing to make more. Chips are used in most everyday electronics, from laptops to refrigerators and cars. The largest chip manufacturers are mainly based in East Asia, with Taiwan, South Korea, Japan, and China in the top five and the US in fourth place.

In 2019, China's smartphone giant Huawei was blacklisted in the US for allegedly violating sanctions. But, later in 2020, under the Trump administration, the US Commerce Department granted some suppliers, like Intel, a license to sell certain items, like central processing unit (CPU) chips, to the Chinese tech giant. Intel is the main CPU chip supplier for most Huawei laptops. 

In 2021, when US President Joe Biden was elected, AMD applied for a similar license but never heard back from the US Commerce Department, a source told Reuters. Biden has been under pressure to revoke Intel's special license, and AMD has argued that it's unfair. 

More recently: In 2022, the US introduced the CHIPS and Science Act, legislation that aimed to boost domestic scientific innovation and tech. In the same year, the US Commerce Department introduced new export rules to restrict the sales of advanced chips and the tech used to make them to China. The US said this was due to concerns about how China might use this advanced tech for military purposes. But it was also all part of the tech race between the two nations, with the US trying to slow down China's tech development. 

Last year, there was talk of US Commerce Department plans to revoke licenses like the one Intel has, as the government was reviewing Huawei's licensing policy, but those plans were put on hold. 

The development: Despite AMD's efforts to get rid of Intel's license to sell to Huawei, the company has managed to keep it for now, two people familiar with the matter said to Reuters. But the effect has been a big revenue gap between the two companies. For example, AMD's share of sales of Huawei laptops containing its chips dropped from 47.1% in 2020 to 9.3% in the first six months of 2023, while Intel's rose from 52.9% to 90.7% in the same period. This win for Intel has meant that Huawei can keep its footing in the global laptop market using Intel chips, while AMD is missing out on sales to the Chinese firm. But, Intel's license is expected to expire later this year, and sources say it probably won't be renewed.

After the Reuters report, Republican Senator Marco Rubio said the Biden administration should revoke Intel's license to sell to Huawei "immediately."

Key comments: 

"The majority of the CPUs used in Huawei's laptops is still from Intel, so any further limitation on it would make Huawei's laptop offering quite challenging," said Emma Xu, an analyst with technology market research firm Canalys.

"No American company, especially those receiving taxpayer funding, should be fueling its innovation," US Senator Marco Rubio said about Intel's expected grant from the Commerce Department to expand its US chip production.