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Trump administration moves to cut Huawei off from global chip suppliers, bars it and its suppliers from using American equipment and technologies

The rule change will not only affect Huawei, the world's no. 2 smartphone maker, but also Taiwan's TSMC, a major producer of chips for Huawei, Apple and Qualcomm.

A day after threatening to cut ties with China over trade-related issues, the Trump administration, in a major escalation, has issued a new rule Friday barring Huawei and its suppliers from using American technology and software.

In an action that could ramp up tensions with China, the US administration on Friday decided to block shipments of semiconductors to Huawei Technologies from major global chipmakers. The US Commerce Department said it was amending an export rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain US software and technology.”

The new rule, which will be effective from in September, will bar companies around the world from using American-made machinery and software to design or produce chips for Huawei or its entities. The companies can now apply for a license to continue supplying those products, but the administration could deny permission those requests.

Huawei, which needs semiconductors for its widely used smartphones and telecoms equipment, is the latest victim of the trade-wars between the United States and China. According to the US Commerce Department, Huawei has been using US software and technology to design semiconductors, despite being placed on a US economic blacklist in May 2019.

The rule change will not only affect Huawei, the world’s no. 2 smartphone maker, but also Taiwan’s TSMC, a major producer of chips for Huawei, Apple and Qualcomm. US govt has allowed wafers already in production to be shipped to Huawei, but those shipments have to be completed within 120 days from Friday. Wafers that will go into production from Friday will come under the new rule.

Most chip manufacturers rely on tools and equipment produced by US companies like KLA, Lam Research and Applied Materials, and also chip designs developed by American companies.

Meanwhile, the Commerce Department has extended a temporary license that was set to expire Friday allowing US companies, many of which operate wireless networks in rural America. These companies are allowed to continue doing business with Huawei till August 13.

Threat to US national security

Commerce Secretary Wilbur Ross said in a statement said that the rule change is to “prevent U.S. technologies from enabling malign activities contrary to US national security and foreign policy interests”. He added that Huawei and its affiliates “have stepped-up efforts to undermine these national security-based restrictions.”

The Commerce Department said the rule will allow wafers already in production to be shipped to Huawei as long as the shipments are complete within 120 days from Friday. The chipsets will need to be in production by Friday or they are ineligible under the rule.

The United States administration has already placed Huawei and 114 affiliates on its economic blacklist citing national security concerns.

Last month, the US Federal Communications Commission (FCC) had initiated the process of shutting down the US operations of three state-controlled Chinese telecommunications companies, citing national security risks. 

US President Donald Trump threatens to cut ties with China

In a sign of further deterioration of ties between US and China, US President Donald Trump on Thursday had said that he had lost interest in speaking to President Xi Jinping and went on to suggest that his country could even cut ties with the China following the outbreak of deadly pandemic of the Wuhan Coronavirus.

Donald Trump, speaking to Fox News on Thursday, had said he was very disappointed with China’s failure to contain the disease and that the pandemic had cast a shadow over the US-China trade deal.

US administration to withdraw billions of dollars worth American pension fund investments from China

Just yesterday, Donald Trump administration had decided to pull out billion dollars worth of American pension fund investments in China. On Thursday, US President Donald Trump confirmed that his administration has asked for the withdrawal of billions of dollars of pension fund investments in China as a response to China’s failure to notify the world regarding the Chinese Coronavirus.

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OpIndia Staff
Staff reporter at OpIndia

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