Encryption chips sold by Hangzhou, the subsidiary of Hualan Microelectronics flagged in warnings from the US Department of Commerce for its ties to the Chinese military have found their way into the storage hardware of military and intelligence networks across the West.

In July of 2021, the Commerce Department's Bureau of Industry and Security added Hangzhou to its so-called "Entity List," which is a vaguely named trade restrictions list that highlights companies "acting contrary to the foreign policy interests of the United States."

The bureau noted that Hualan had been added to the list for "acquiring and ... attempting to acquire US-origin items in support of military modernisation for [China's] People's Liberation Army" although we don't know if it had any proof of that.

Two years later, Hualan -- another subsidiary known as Initio, a company originally headquartered in Taiwan that it acquired in 2016 still supplies encryption microcontroller chips to Western manufacturers of encrypted hard drives, including several that list as customers on their websites Western governments' aerospace, military, and intelligence agencies: NASA, NATO, and the US and UK militaries.

Federal procurement records show that US government agencies from the Federal Aviation Administration to the Drug Enforcement Administration to the US Navy have bought encrypted hard drives that use the chips, too.

The disconnect between the Commerce Department's warnings and Western government customers means that chips sold by Hualan's subsidiary have ended up deep inside sensitive Western information networks, perhaps due to the ambiguity of their Initio branding and its Taiwanese origin prior to 2016.