US Considers Blocking Chip Shipments To Huawei – Report

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Taiwan’s TSMC could be ordered to halt shipments of silicon chips to Huawei under potential new US restrictions

The United States continues to exert maximum pressure on Huawei Technologies, amid reports it is considering blocking shipments of chips to the Chinese networking giant.

Top US officials are reportedly meeting at the end of this month to weigh new regulations to stop more foreign shipments of products with US technology to Huawei.

Last week the US filed more indictments against Huawei and accused the firm of stealing trade secrets from six American companies and helping the Iranian regime track protesters. It also charged Huawei with violating a racketeering law typically used to combat organised crime. Huawei for its part, continues to deny all the US charges.

Chip making equipment

But now Reuters is reporting that the Trump administration is considering changing US regulations to allow it to block shipments of chips to Huawei from companies such as Taiwan’s TSMC.

The chip proposal has reportedly already been drafted, but its approval is far from certain, one of the sources said.

“What they’re trying to do is make sure that no chips go to Huawei that they can possibly control,” the second source told Reuters.

By focusing on stopping global chip sales to Huawei, US authorities would reportedly have to alter the Foreign Direct Product Rule. This subjects some foreign-made goods based on US technology or software to US regulations.

For example, back in May last year, staff at British chip designer ARM Holdings were told to suspend all business with Huawei, after President Donald Trump had signed a national security executive order and immediately after that, Huawei was placed on an ‘Entity List’, which prevented it from acquiring parts and components from US companies.

ARM was worried at the time that its processor designs might contain “US origin technology”, but an internal legal investigation later ruled that its chip technology was of UK origin, and thus US restrictions did not apply and ARM was able to continue work with Huawei.

But now Reuters is reporting that the draft US proposal would force foreign companies that use US chipmaking equipment to seek a US license before supplying Huawei.

Most chip manufacturers rely on equipment produced by American companies such as KLA, Lam Research and Applied Materials, according to a report last year from China’s Everbright Securities.

“There is no production line in China that uses only equipment made in China, so it is very difficult to make any chipsets without US equipment,” Everbright reportedly wrote.

Trade exceptions

For the past year the US Commerce Department has been repeatedly implemented a 90-day delay to the imposition of trade restrictions on Huawei, that meant US trade with China and Huawei was still possible.

It issued the second 90-day reprieve in August 2019, and in November the US issued its third such 90-day extension.

But last week the US Commerce Department announced it was extending a temporary general license, but this time only for 45 days.

Another US tactic has seen the US Attorney General William Barr has also recently suggested that the United States and its allies take a ‘controlling stake’ in Ericsson and Nokia to counter Huawei.

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Author: Tom Jowitt
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