U.S. prepares crackdown on Huawei's global chip supply
Senior officials in the Trump administration agreed to new
measures to restrict the global supply of chips to China’s Huawei Technologies,
sources familiar with the matter said, as the White House ramps up criticism of
China over coronavirus.
The move comes as ties between Washington and Beijing grow
more strained, with both sides trading barbs over who is to blame for the
spread of the disease and an escalating tit-for-tat over the expulsion of
journalists from both countries.
Under the proposed rule change, foreign companies that use
U.S. chipmaking equipment would be required to obtain a U.S. license before supplying
certain chips to Huawei. The Chinese telecoms company was blacklisted last
year, limiting the company’s suppliers.
One of the sources said the rule-change is aimed at curbing
sales of chips to Huawei by Taiwan Semiconductor Manufacturing Co, a major
producer of chips for Huawei’s HiSilicon unit, as well as the world’s largest
contract maker.
It is unclear if President Donald Trump, who appeared to
push back against the proposal last month, will sign off on the rule change.
But if finalized, it could deal a blow to Huawei and TSMC, hurting U.S.
companies as well, sources said.
“This is going to have a far more negative impact on U.S.
companies than it will on Huawei, because Huawei will develop their own supply
chain,” trade lawyer Doug Jacobson said. “Ultimately, Huawei will find
alternatives.”
A person familiar with the matter said the U.S. government
has gone to great lengths to ensure impacts on U.S. industry will be minimal.
The move could anger Beijing, which has spoken out against a
global campaign by the United States to compel allies to exclude Huawei from
their 5G networks over spying concerns. Huawei has denied the allegations.
Most chip manufacturers rely on equipment produced by U.S.
companies such as KLA Corp, Lam Research and Applied Materials, according to a
report last year from China’s Everbright Securities.
The equipment makers did not immediately respond to requests
for comment.
The decision came when U.S. officials from various agencies
met and agreed on Wednesday to alter the Foreign Direct Product Rule, which
subjects some foreign-made goods based on U.S. technology or software to U.S.
regulations, the sources said.
Attendees likely included top officials from the National
Security Council and the U.S. Departments of State, Defense, Energy and
Commerce. None of them responded to requests for comment.
Huawei declined to comment. TSMC said it “is unable to
answer hypothetical questions and does not comment on any individual customer.”
One of the sources said the rule-change is aimed at
restricting the sale of sophisticated chips to Huawei and not older, more
commoditized and widely available semiconductors.
“It’s impossible to tell the impact until we know the
technical thresholds that may apply,” said Washington lawyer Kevin Wolf, a
former Commerce Department official.
“Different foundries make different chips at different
capabilities so you wouldn’t know which foundries are affected the most until
you know the technical thresholds,” he said.
U.S.-CHINA TENSIONS
The United States placed Huawei on a blacklist in May last
year, citing national security concerns. The entity listing, as it is known,
allowed the U.S. government to restrict sales of U.S.-made goods to the company
and some more limited items made abroad that contain U.S. technology.
But under current regulations, key foreign supply chains
remain beyond the reach of U.S. authorities, fueling frustration among China
hawks in the administration and prompting a push to toughen up export rules for
the company, Reuters reported in November.
The hawks’ efforts appeared in jeopardy last month when
Trump reacted strongly against the proposed crackdown, after Reuters and the
Wall Street Journal reported that a move to block global chip sales to Huawei
was under consideration.
“I want our companies to be allowed to do business. I mean,
things are put on my desk that have nothing to do with national security,
including with chipmakers and various others. So we’re going to give it up, and
what will happen? They’ll make those chips in a different country or they’ll
make them in China or someplace else,” Trump said.
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