Exclusive: U.S. prepares crackdown on Huawei’s global chip supply – sources
(Reuters) – Senior officers within the Trump administration agreed to new measures to limit the global supply of chips to China’s Huawei Technologies, sources accustomed to the matter stated, because the White House ramps up criticism of China over coronavirus.
FILE PHOTO: A Huawei firm brand is pictured on the Shenzhen International Airport in Shenzhen, Guangdong province, China July 22, 2019. REUTERS/Aly Song/File Photo
The transfer comes as ties between Washington and Beijing develop extra strained, with each side buying and selling barbs over who’s responsible for the unfold of the illness and an escalating tit-for-tat over the expulsion of journalists from each international locations.
Under the proposed rule change, overseas corporations that use U.S. chipmaking tools could be required to acquire a U.S. license earlier than supplying sure chips to Huawei. The Chinese telecoms firm was blacklisted final yr, limiting the corporate’s suppliers.
One of the sources stated the rule-change is geared toward curbing gross sales of chips to Huawei by Taiwan Semiconductor Manufacturing Co (2330.TW), a serious producer of chips for Huawei’s HiSilicon unit, in addition to the world’s largest contract maker.
It is unclear if President Donald Trump, who appeared to push again towards the proposal final month, will log out on the rule change. But if finalized, it may deal a blow to Huawei and TSMC, hurting U.S. corporations as nicely, sources stated.
“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,” commerce lawyer Doug Jacobson stated. “Ultimately, Huawei will find alternatives.”
An individual accustomed to the matter stated the U.S. authorities has gone to nice lengths to make sure impacts on U.S. trade might be minimal.
The transfer may anger Beijing, which has spoken out towards a global marketing campaign by the United States to compel allies to exclude Huawei from their 5G networks over spying issues. Huawei has denied the allegations.
Most chip producers rely on tools produced by U.S. corporations similar to KLA Corp (KLAC.O), Lam Research (LRCX.O) and Applied Materials (AMAT.O), in line with a report final yr from China’s Everbright Securities.
The tools makers didn’t instantly reply to requests for remark.
The choice got here when U.S. officers from numerous businesses met and agreed on Wednesday to change the Foreign Direct Product Rule, which topics some overseas-made items based mostly on U.S. know-how or software program to U.S. rules, the sources stated.
Attendees doubtless included high officers from the National Security Council and the U.S. Departments of State, Defense, Energy and Commerce. None of them responded to requests for remark.
Huawei declined to remark. TSMC stated it “is unable to answer hypothetical questions and does not comment on any individual customer.”
One of the sources stated the rule-change is geared toward proscribing the sale of subtle chips to Huawei and never older, extra commoditized and extensively out there semiconductors.
“It’s impossible to tell the impact until we know the technical thresholds that may apply,” stated 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 stated.
The United States positioned Huawei on a blacklist in May final yr, citing nationwide safety issues. The entity itemizing, as it’s recognized, allowed the U.S. authorities to limit gross sales of U.S.-made items to the corporate and a few extra restricted objects made overseas that comprise U.S. know-how.
But underneath present rules, key overseas supply chains stay past the attain of U.S. authorities, fueling frustration amongst China hawks within the administration and prompting a push to toughen up export guidelines for the corporate, Reuters reported in November.
The hawks’ efforts appeared in jeopardy final month when Trump reacted strongly towards the proposed crackdown, after Reuters and the Wall Street Journal reported that a transfer to dam global chip gross sales to Huawei was into 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 stated.
Additional reporting by Mike Stone in Washington, Editing by Chris Sanders, Nick Zieminski and Dan Grebler