The Trump administration issued a new rule last week that prevents Chinese telecom company Huawei and its suppliers from using U.S. technology and software, The New York Times and other news outlets report. The rule will keep companies from using American-made machinery and software to create or produce chips for Huawei or its associated companies. Companies can apply for a license to continue to supply those products, but the administration said it would likely deny such requests.
The rule change is expected to take effect in September.
The decision will likely harm Huawei, which counts on American-made machinery and software designs to create chips for its smartphones and tablets. The Trump administration has said Huawei is a threat to national security and that it’s equipment should be trusted because it is behold to the Chinese government, according to The New York Times. Huawei has denied the accusation.
This is not the first time the administration has put restrictions on Huawei. Last year, the U.S. put Huawei in an “entity list”, which prevented American products being exported to the company and its affiliates unless suppliers had a license. Huawei started to scale back on its reliance on American chip manufacturers like Qualcomm and produce in-house through the chip unit HiSilicon. Unfortunately for Huawei, HiSilicon uses outside manufacturers that rely on technology that’s developed and refined in the U.S.
“There has been a very highly technical loophole through which Huawei has been able, in effect, to use U.S. technology with foreign fab producers,” Commerce Secretary Wilbur Ross said in a recent interview. Ross said the recent rule changes are tailored moves “to try to correct that loophole and make sure that the American fab foundries are competing on an equal footing with the foreign ones.”
U.S. rule change could hurt more than just Huawei
The administration’s decision to block chip shipments to Huawei could also impact manufacturers that sell to the company. The Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) and the Taiwan Semiconductor Manufacturing Company (TSMC) both rely on American manufacturing tools, according to The New York Times. Additionally, the measure could decrease semiconductor equipment makers’ sales such as Applied Materials, KLA, Lam Research and chip design software companies.
Meanwhile, American tech companies like Apple and Qualcomm that depend on sales to China could experience a backlash.
“Based on what I know, if the U.S. further blocks key technology supply to Huawei, China will activate the ‘unreliable entity list,’ restrict or investigate U.S. companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes,” Global Times Editor-in-Chief Hu Xijin, said on Twitter.
Nebraska Senator Ben Sasse said the rule change was long overdue, however.
“The United States needs to strangle Huawei,” Sasse said in a statement. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs. This is pretty simple: Chip companies that depend on American technology can’t jump into bed with the Chinese Communist Party.”