Major chip manufacturers are affected by U.S. new chip export rules targeting Huawei

16 May, 2020 07:56
source: Singularity Financial

Singularity Financial Hong Kong May 16, 2020 – by David Lee

The Trump administration issued a new rule Friday that will bar Huawei and its suppliers from using American technology and software, a significant escalation in the White House’s battle with the Chinese telecom giant and one that is likely to inflame tensions with Beijing.

The new US rule, “which is slated to go into effect in September”, applies to foreign-made items, using US technology. It exempts equipment or software made or shipped within the next 120 days – a move meant to limit economic harm. Companies can apply for a license to continue supplying those products, “but the administration said the presumption would be to deny those requests.” according to a report from New York Times. 

Major chip manufacturers are affected

The measure is the latest of several restrictions taken against Huawei in the last year. The administration added Huawei to an “entity list” last May, barring exports of American products to the company and 114 of its affiliates unless suppliers had first obtained a license.

After that rule was imposed, Huawei took steps to reduce its reliance on American chip manufacturers like Qualcomm and ramp up its in-house production through a chip unit, HiSilicon.

But HiSilicon still relies on outside manufacturers, including the Shanghai-based Semiconductor Manufacturing International Corporation, or S.M.I.C., and the Taiwan Semiconductor Manufacturing Company, or T.S.M.C., to mass-produce chips to its specifications. Many of those operations rely to some extent on technology that was developed and refined in the United States, where the semiconductor industry began.

In a statement on Friday, US Commerce Department Secretary Wilbur Ross said that those efforts were “still dependent on US technologies”, and accused Huawei of taking steps “to undermine” earlier export controls.

In a background briefing for reporters, the US said officials would consider licence applications to do business with Huawei on a “case by case” basis.

“This is a licensing requirement. It does not necessarily mean that things are denied,” a senior State Department official said. “We tend to approach Huawei with some concern but this is a measure that gives the US government visibility into what is moving.”

Also on Friday, the US extended waivers that allow US companies, many of them rural internet providers, to use some kinds of Huawei technology for another 90 days.

While the scope of the measure remains unclear, it could weigh on major chip contract manufacturers that sell to Huawei, particularly S.M.I.C. and T.S.M.C., which rely heavily on American manufacturing tools. It may also clamp down on sales by makers of semiconductor equipment, like Applied Materials, KLA and Lam Research, as well as chip design software companies.

Several mobile chip suppliers are down strongly in Friday trading, and many chip equipment makers are giving back a lot of their big Thursday gains boosted by Taiwan Semiconductor  (TSMC) announcing plans to build a major fab in Arizona.