US reportedly moves to restrict all Huawei access to US chip tech

The US Department of Commerce is said to be weighing new options to further limit Huawei’s access to the semiconductor technologies coming out the American companies.

The Wall Street Journal reported (behind paywall) that the DoC is working on changes to the remit of the “foreign direct product rule” to demand Huawei’s chip suppliers to apply for special licences if they use American technologies and American equipment. The rule currently “restricts foreign companies’ use of U.S. technology for military or national-security products”.

The measures have been mooted for a few weeks but have only just been put forward. President Trump is yet to review it, and not everyone in the administration is in favour of the changes, the newspaper reported. Semiconductor is one of America’s biggest export sectors to China.

The new rules could become a deterrent to all the semiconductor foundries for Huawei, including the Chinese companies, as they could be relying on technologies owned by or using equipment made by American companies. They could be forced to choose between holding on to Huawei as a customer or keeping their legitimate access to American technologies.

Taiwan Semiconductor Manufacturing Company Limited (TSMC), the world’s largest contract chip maker, is said to have generated more than 10% of its $35 billion annual income from fabrication for HiSilicon, Huawei’s fabless chip design subsidiary, according to estimate cited by WSJ.

Over the past year, despite the US restrictions on semiconductor export to Huawei, many businesses have managed to continue their business without a special licence, if they could prove the proportion of American-made value is lower than 25% of the total value. The DoC has proposed to lower the threshold to 10%.

If the new measures should enter into force, they would not only disperse the optimism for the telecoms industry following the “Phase-1” trade deal signed between the US and China, but also represent a new escalation of the Trump Administration’s efforts to further hamstring Huawei. Semiconductor fabrication has been an area that China has struggled to gain on their American competitors.

It would also be seen as part of the concerted government actions towards this purpose. The Defense Department has recently dropped its opposition to the government’s efforts to restrict American chip makers to supply Huawei through their overseas facilities.

The WSJ report comes days after the DoJ announced a set of superseding indictments, also days after the DoC granted 45 days extension to Huawei’s “Temporary General License”. At the time of writing, Huawei has not responded to Telecoms.com’s request for comment.