- Huawei's resilience against U.S. sanctions stems from a combination of substantial Chinese government support, including financial bailouts and investment in a domestic semiconductor ecosystem, and the company's own adaptive strategies like stockpiling components and diversifying into new sectors like cloud computing and AI.

- The company has effectively circumvented U.S. restrictions by exploiting loopholes and utilizing sophisticated, multi-layered networks of domestic and foreign partners to acquire essential technologies, such as advanced chips from third-party intermediaries.

- Despite sanctions, Huawei has achieved significant technological progress, developing its own advanced chips and becoming a major competitor in the global market. This case highlights the limitations of economic coercion and serves as a warning for middle-power economies to diversify their own supply chains and invest in indigenous innovation to avoid being caught in the escalating U.S.-China tech rivalry.

Introduction

After seven years of sanctions, has Washington succeeded in achieving its objectives against Huawei? Amid an intensifying strategic rivalry between China and the United States, Huawei Technologies—a leading Chinese technology firm—has emerged as a central target of U.S.-led sanctions. Washington has sought to eliminate Huawei’s telecommunications equipment from both public and private networks, urged allies to follow suit, and restricted the company’s access to advanced technologies originating from the United States and its partners. When these restrictions were first implemented, a steep decline in Huawei’s fortunes seemed inevitable. Yet the results suggest, at best, a mixed record. The company continues to hold a leading position in the global telecommunications equipment market, and its revenue has returned to pre-sanctions levels, recovering from sharp setbacks during the initial years of U.S. measures. Moreover, Huawei has demonstrated remarkable technological progress, including the development of advanced chips produced domestically. What accounts for this resilience? This study argues that Huawei has withstood escalating U.S. restrictions through a combination of strong support from both China’s central and local governments, adaptive corporate strategies, and the actions of domestic and foreign sanctions evaders.

Government Support

Although the Chinese government has long supported Huawei, its backing intensified immediately following the imposition of U.S. sanctions. This support has taken two primary forms. First, authorities moved swiftly to secure Huawei’s continued access to essential materials and manufacturing equipment. On May 16, 2019—the same day the U.S. Department of Commerce added Huawei to its trade blacklist—the Shenzhen municipal government registered a new investment vehicle, the Shenzhen Major Industry Investment Group (SMI). In effect, the Shenzhen government created SMI to accelerate the formation of a self-sufficient semiconductor ecosystem centered on Huawei’s needs.

But more important was the substantial financial support provided by both the Shenzhen municipal government and the central authorities in Beijing. One of the most significant infusions came through the government-orchestrated sale of Huawei’s budget smartphone unit, Honor, which had been struggling under the weight of U.S. sanctions. In November 2020, Shenzhen Zhixin New Information Technology Co.—a firm controlled by a local government-led consortium—acquired the unit in a deal worth $15 billion. Direct financial support also increased markedly in the aftermath of U.S. sanctions. According to Huawei’s 2023 annual report, the company received more than 7.3 billion Chinese yuan (CNY) in government grants that year—over four times the amount reported in 2019. This sustained financial commitment has underwritten Huawei’s long-term strategy of achieving technological self-sufficiency.

Huawei’s own survival efforts

Huawei has also undertaken its own survival strategies, with three particularly notable approaches. First, the company capitalized on the lag between the announcement and implementation of U.S. sanctions to amass significant stockpiles. Although legislative efforts targeting Huawei began in May 2018, the company was not officially added to the Entity List until twelve months later. Moreover, the DoC issued a Temporary General License that permitted limited transactions with Huawei until August 2020—particularly those related to the maintenance of existing networks and equipment. This twenty-seven-month window gave Huawei critical time to prepare. Huawei reportedly stockpiled enough chips to meet projected demand for several years.

Second, Huawei has worked to diversify its sources of revenue in order to reduce its vulnerability. Notably, the company has expanded its enterprise division, which now includes cloud computing, database software, operating systems, artificial intelligence development, private networks, and virtualization. The strategic aim is to create synergies between Huawei’s existing hardware strengths and new software opportunities.

Third, U.S. export controls created strong commercial and political incentives for Huawei to pursue technological independence. The company’s development of cutting-edge chips, advanced laptops, and high-end smartphones exemplifies its efforts to reduce reliance on U.S. technology and its tangible progress toward self-sufficiency. Huawei is now at the forefront of China’s broader campaign to delete American technologies from its supply chains. Its achievements in the semiconductor sector are particularly notable—so much so that U.S. chip giant Nvidia recently identified Huawei as one of its top competitors

Sanction busting and resistance

Chinese companies—including Huawei—have proven remarkably adept at identifying and exploiting loopholes in U.S. export controls. Two recent cases illustrate the growing vulnerabilities of Washington’s sanctions regime. In October 2024, a Huawei processor known as the Ascend 910B—used for training artificial intelligence models and containing multiple types of computer chips—was found to include semiconductors manufactured by TSMC. TSMC firmly denied supplying Huawei directly since the implementation of U.S. restrictions in 2020. However, it has continued shipping chips to other Chinese clients, some of which have rerouted products to Huawei. One such firm, Xiamen Sophgo Technologies, reportedly placed orders with TSMC for hundreds of thousands of chips with a design identical to one used in a Huawei processor. The presence of a TSMC chip in a Huawei processor underscores the sophisticated and multilayered strategies employed by Chinese firms to circumvent sanctions—ranging from third-party intermediaries to offshore entities and shell companies.

The release of the Mate 60 Pro offers another striking example of Huawei’s ability to circumvent sanctions. The phone is powered by a 7 nm chip reportedly produced by China’s largest semiconductor foundry, SMIC, using deep ultraviolet lithography systems. However, SMIC’s capacity to fabricate such an advanced chip is widely believed to depend not on indigenous innovation, but rather on continued access to foreign manufacturing equipment. In its 2023 annual report, Dutch chip equipment maker ASML revealed that a China-based employee had engaged in the unauthorized misappropriation of proprietary technology—an incident that may have violated export control laws. As long as SMIC retains access to advanced DUV lithography tools from ASML and other critical equipment from U.S. vendors, it can continue to produce 7 nm chips at scale.

Conclusion

Huawei’s trajectory under U.S. sanctions offers a revealing case of both the limitations and unintended consequences of strategic economic coercion. Despite unprecedented restrictions aimed at crippling its access to cutting-edge technologies and global markets, Huawei has regained much of its commercial and technological footing. The result is not only Huawei’s survival, but its continued competitiveness in advanced telecommunications and AI-related technologies.

This case holds broader implications for middle-power economies such as South Korea. As the United States and China harden their positions in a long-term technological rivalry, countries with strong innovation ecosystems and export-oriented industries risk becoming collateral damage. The Huawei episode underscores the need for such economies to diversify supply chains, reduce overdependence on any single market or technology source, and invest more deeply in indigenous innovation. South Korea, in particular, must balance its alliance with the United States with its significant economic interdependence with China—especially in semiconductors and telecommunications.

To navigate this strategic landscape, South Korea should strengthen its capacity to detect and respond to global tech realignments, protect its firms from becoming entangled in extraterritorial sanctions, and invest in multilateral frameworks that promote transparency and resilience in high-tech sectors. Huawei’s case is a warning that global tech bifurcation is accelerating—and that middle powers must prepare not just to endure it, but to shape its outcomes.