[Update: Huawei’s statement] US blocks many chip makers from supplying HiSilicon Kirin SoCs to Huawei
It’s been one year since Huawei was placed on the U.S. Commerce Department’s Entity List, barring U.S. based companies from doing business with Huawei and its fully-owned subsidiaries. That ban has never been in full effect as the U.S. keeps extending Huawei’s Temporary General License, allowing them to keep their licenses to distribute Google Mobile Services on devices introduced before the ban. The main result of that ban has been that Huawei can’t ship new smartphones (even under its Honor sub-brand) with Google Mobile Services, and that will remain true until at least May 2021. Now, the U.S. Government is escalating trade restrictions even further by moving to block many chip makers from supplying HiSilicon Kirin SoCs to Huawei.
Today, the U.S. Commerce Department amended an export rule to block shipments of chips to Huawei. This move was made to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain US software and technology.” Secretary of Commerce Wilbur Ross said, “Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort.” Essentially, the U.S. feels Huawei was exploiting a loophole in the previous ban, so the U.S. is now tightening the rules.
The rule prevents foreign manufacturers who use American software and technology from shipping products to Huawei unless they get a license from the U.S. This would mean that Taiwan Semiconductor Manufacturing Co. (TSMC), which makes most of the HiSilicon Kirin chips, would be blocked from shipping chips to the Chinese company. Other contract chipmakers that likely use some American technology, such as Samsung Foundry and Global Foundries, would be blocked as well, but they don’t provide much (if anything) to Huawei already.
Shanghai-based SMIC is the only chip maker truly safe from this restriction, and they actually produced Huawei’s new 14nm Kirin 710A chip. The problem with SMIC, for Huawei at least, is they are not nearly as advanced as TSMC or Samsung. This new rule also comes at an interesting time for TSMC, who just announced plans to open a $12 billion factory in Arizona.
Unlike the Android license restriction on new devices, this new rule is much more difficult for Huawei to work around. Without Google apps, the company can sort of “retreat” to its home market of China and hope to still sell enough devices. This new restriction, however, will affect even those devices launched exclusively in China. The company will now need to rely on its existing stock of chips or the less advanced SMIC for production.
Update: Huawei’s statements on recent developments
On the occasion of the Huawei Analyst Summit 2020 that is currently being held virtually, Huawei issued a statement on the recent changes to the Foreign Direct Product Rule.
The US Department of Commerce’s amendment to the Foreign Direct Product Rule specifically targets Huawei and undermines the growth of industries and livelihood of billions of people. We stand with our customers and partners to overcome the discriminatory rule. pic.twitter.com/0DAagA1uMB
— Huawei (@Huawei) May 18, 2020
The video has been reproduced in the text below:
“Huawei categorically opposes the amendments made by the US Department of Commerce to its Foreign Direct Product Rule that targets Huawei specifically.
The US Government added Huawei to its Entity List on May 16, 2019, without justification. Since that time, we have remained committed to complying with all US Government rules and regulations. Despite the fact that a number of key industrial and technological elements were denied to us, we nevertheless fulfilled our contractual obligations to customers and to suppliers. And we have survived and we forged ahead against the odds.
Nevertheless, in its relentless pursuit to tighten its stranglehold on our company, the US government has decided to proceed and ignore completely the concerns expressed by many companies and industry associations. This decision is both arbitrary and pernicious and threatens to undermine the entire industry worldwide. The new rule will impact the expansion, maintenance, and the continuous operations of networks around the world, worth hundreds of millions of dollars that exist in more than 170 countries. It will also impact communication services for more than 3 billion citizens and people worldwide who use Huawei products and services.
To attack a leading company from another country, the US government has, we believe, intentionally turned its back on the interests of Huawei’s customers and the consumers they support. This goes against the US government’s claim that its actions are motivated by concerns of cybersecurity. The decision by the US government, we believe, does not just affect Huawei — it will have a serious impact on a number of industries worldwide.
In the long run, this action, we believe, will damage the trust and collaboration within the global semiconductor industry, upon which many other industries depend. This will lead to an increase in conflict and loss within these industries. The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust that international companies place in US technology and supply chain. Ultimately, this action will harm the US’s interests.
Huawei is undertaking a comprehensive examination of this new rule. We expect, inevitably, that our business will be impacted. We will try to seek solutions. Finally, we hope that our customers and our suppliers will continue to support us and stand with us as we aim to minimize the impact of what is a discriminatory move.”