A Huawei sign outside a store in Beijing, China. Picture: REUTERS/TINGSHU WANG/
A Huawei sign outside a store in Beijing, China. Picture: REUTERS/TINGSHU WANG/

New York —  The US commerce department announced further restrictions on Huawei Technologies aimed at cutting the Chinese company’s access to commercially available chips, the latest move in an increasingly tense relationship between the world’s two biggest economies.

The changes, which the department announced in a written statement on Monday, build on restrictions announced in May, adding 38 Huawei affiliates in 21 countries to an economic blacklist as the US seeks to limit adoption of the company’s 5G technology.

“We don’t want their equipment in the US because they spy on us,” President Donald Trump said Monday in an interview.

The move is the latest tit-for-tat in escalating tensions between Washington and Beijing over everything from the origins of the Covid-19 pandemic to China’s increasingly tight grip over Hong Kong. Despite the US decision, commerce secretary Wilbur Ross said on Fox Business that talks with China continue on various levels.

The restrictions are likely to further hit both Huawei’s 5G base stations and smartphone businesses because it relies heavily on foreign chips to make those, further denting China’s ambition to play a key role in global rollout of 5G technology. Huawei’s stockpiles of certain self-designed chips essential to telecom equipment will run out by early 2021.

Nokia and Ericsson stand to benefit from Huawei’s further faltering in its 5G prowess, while domestic smartphone rivals including Xiaomi, Oppo and Vivo are likely to get a bigger slice of the Chinese market.

Ross said the action was aimed at closing loopholes the company explored after previous US actions. Secretary of state Michael Pompeo praised the move as a “direct blow” against the Chinese Communist Party.

The company has long rejected accusations that its technology can be used to spy on foreign nations or companies.

All chip companies working for Huawei, no matter where they are, will need premits, a commerce department official said, adding that even foreign companies will be affected as long as they use US design software and equipment.

That means major Asian and European chip companies such as MediaTek, Samsung Electronics, NXP Semiconductors, and STMicroelectronics  may need a licence to continue shipping to Huawei, though the official declined to name any specific company.

There are few semiconductor companies in the world, including those in China, that do not rely on software from US-based Synopsys and Cadence Design Systems to create blueprints for chips. Many companies that make physical chips, including China’s own Semiconductor Manufacturing International Corporation, use equipment from US-based Applied Materials  and Lam Reserach Corporation.

European chipmakers

Among customers of Synopsys and Cadence, Taiwan’s MediaTek has become a main chip provider to Huawei after Taiwan Semiconductor Manufacturing said it will no longer ship chips to the Chinese company after September 15. That is  due to the US’s export-control rules added in May, which forbade companies from making chips based on Huawei’s design using American equipment.

The latest US restrictions on Huawei are negative for European chipmakers, JPMorgan Chase analysts said in a note, adding that a key risk for firms such as STMicroelectronics, AMS  and Dialog Semiconductor  is Chinese retaliatory restrictions on major customer Apple.

Additionally, assemblers that incorporate Huawei or third-party chips into their devices for the benefit of Huawei will also need to apply for a licence, according to the official. That means Huawei smartphones assemblers, including Hong Kong-listed Foxconn subsidiary FIH Mobile, may be restricted by the new rules.

Bloomberg

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.