Step 1

2 Tbsp. small wood chips, preferably applewood, soaked in water for 30 minutes, drained

Step 2

Line the bottom of a large pot with foil and scatter soaked wood chips over. Cover and heat over medium-high until chips begin to smoke. (If you have a kitchen torch, use it to give chips a kick-start.) Arrange cashews in a single layer in a metal steamer basket; place inside pot. Cover pot; smoke cashews, adjusting heat as needed to maintain constant level of smoke, until golden brown, 10–15 minutes. Remove steamer from pot; let cashews cool.

Step 3

Purée cashews, chiles, sugar, and ¾ cup water in a blender, adding water by tablespoonfuls, if needed, until smooth. Season with salt.

Step 4

DO AHEAD: Salsa can be made 1 week ahead. Cover and chill.