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A man check his phone near an Apple logo outside its store in Shanghai, China September 13, 2023. 

Aly Song | Reuters

Apple is facing a number of issues in China, with geopolitical risks mounting and the economy still not firing as many would have hoped.

But the biggest challenge of all, according to analysts, could be a resurgent Huawei after a purported major semiconductor breakthrough that flew in the face of U.S. sanctions.

The latest chip, made by China’s biggest semiconductor manufacturer SMIC, has sparked concern in Washington and raised questions about how it was possible, without the company being able to access critical technologies.

But there is also scrutiny on whether the process being used to make these new chips is efficient enough on a large scale to sustain a Huawei comeback.

What has happened to Huawei so far?

What’s the big deal about Huawei’s new chip?

Alongside Apple and Samsung, Huawei is one of only a few companies that has designed its own smartphone processor. This was done through the Chinese firm’s HiSilicon division.

The chip however was manufactured by Taiwan Semiconductor Manufacturing Co., or TSMC. U.S. export restrictions, which effectively barred Huawei from using American technology anywhere along the chipmaking process, meant the Chinese company could no longer source its chips from TSMC.

China's Huawei launch coinciding with Apple ban was a strategic decision, says UBS's Art Cashin

The Taiwanese chipmaker is the most advanced semiconductor manufacturer in the world. There is no Chinese company that can do what TSMC does. That’s why shockwaves were sent through the political and tech world when Huawei quietly released the Mate 60 Pro in China this month, with analysis showing a chip inside made by SMIC.

Along with Huawei, SMIC is on a U.S. trade blacklist called the Entity List. Companies on this list are restricted from buying American technology. Meanwhile, SMIC’s technology is seen as generations behinds the likes of TSMC.

So how could this have been done with the huge amount of sanctions on both Huawei and SMIC?

What we know about Huawei’s chip

Huawei’s smartphone chip is called the Kirin 9000S, which combines the processor and components for what appears to be 5G connectivity. 5G refers to next-generation mobile internet that promises super-fast speeds. Huawei has not confirmed the phone is 5G capable, but reviews have shown the device is capable of hitting download speeds associated with 5G.

The semiconductor has been manufactured using a 7 nanometer process by SMIC, China’s biggest contract chipmaker, according to an analysis of the Mate 60 Pro by software company TechInsights.

The nanometer figure refers to the size of each individual transistor on a chip. The smaller the transistor, the more of them can be packed onto a single semiconductor. Typically, a reduction in nanometer size can yield more powerful and efficient chips.

The 7nm process is seen as highly-advanced in the world of semiconductors, even though it is not the latest technology.

For years, SMIC struggled to make 7nm chips. That’s in part because it couldn’t get its hands on a very expensive piece of kit called an extreme ultraviolet (EUV) lithography machine. These are made by Dutch firm ASML, but the company has been restricted by its government from sending these machines to China.

Chipmaking nations such as the U.S. are teaming up against China

Many thought this would hold back SMIC’s ability to make advanced chips. But it seems to have made it happen without these tools.

In a blogpost this month, Dan Hutcheson, vice chair of TechInsights, said the 7nm chip “demonstrates the technical progress China’s semiconductor industry has been able to make without EUV lithography tools.”

Huawei was not immediately available for comment regarding this story when contacted by CNBC.

Is this a big deal or just posturing?

From a technology perspective, it is significant that SMIC has manufactured chips using a 7nm process without ASML’s EUV machines.

Pranay Kotasthane, deputy director of the Takshashila Institution, told CNBC that it is likely that equipment used for older manufacturing processes are being “repurposed” for these more advanced chips. But he believes the process is likely being undertaken with “lower efficiency” than if SMIC were to use cutting-edge equipment.

And that’s a key point. While SMIC is able to create 7nm chips, it’s unclear how efficient, profitable and sustainable that is on a bigger scale. A closely watched metric is “yield” — the number of chips made out of a specific wafer.

If a chip manufacturer’s yield is low, then the process is not seen as efficient and can be costly. While the yield of SMIC’s 7nm process for Huawei chips is not known, it is “probably low,” Kotasthane said.

It is a waiting game to see if SMIC can produce the number of chips that Huawei requires at a profitable scale.

What will the U.S. do next?

The technology advancement has certainly rattled Washington. The U.S. Department of Commerce issued a statement this month saying it is looking to get more information on Huawei’s chip.

SMIC’s 7nm manufacturing process has also exposed some of the weaknesses in the U.S.’s export restriction strategy, which could lead to further curbs.

“There will be pressure on the U.S. to reconsider its export controls strategy, which was based on the assumption that controls would prevent Chinese companies from producing advanced-edge chips, while the business-as-usual approach would continue at the trailing-edge nodes. It is increasingly becoming clear that this distinction doesn’t work in reality,” Kotasthane said.

He added that Washington may look at other areas of the chip design and manufacturing process to enact further restrictions.

Apple’s China headwinds grow with Huawei chip

The Wall Street Journal reported this month that Chinese central government staffers had been banned from using iPhones and other foreign branded phones for work and even prohibited them from being brought into the office.

China’s Ministry of Foreign Affairs said last week there weren’t any regulations prohibiting the purchase and use of foreign phones.

As geopolitical tensions between the U.S. and China continue to bubble under the surface, it is perhaps a potential Huawei resurgence that poses the biggest threat to Apple.

A Huawei 7nm chip will likely impact Apple's sales in China, says Cowen's Krish Sankar

“It’s expected that Huawei will pose a bigger challenge to Apple in China than the geopolitical issue,” Will Wong, a senior research manager at IDC, told CNBC.

“This is because Huawei not only has the same premium brand image as Apple but also is a national pride in China.”

Apple is seen as a high-end smartphone maker and Huawei had directly competed with the U.S. firm in China for years. But Huawei’s sales fell off a cliff when it couldn’t equip its smartphones with 5G technology and the latest chips.

Any kind of resurgence in this area, as appears to be the case with the Mate 60 Pro, could make Huawei’s new phones an attractive option again for Chinese buyers.

“The biggest threat from Huawei is its continuous development in technology, not only in chips but also in new form factors like foldables,” Wong added.

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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