For close to a year, Huawei has been trying to stay competitive despite dire US sanctions hitting them very hard for certain regions. The company was placed on the Department of Commerce's Entity List, meaning that US companies are barred from exporting products to Huawei. This sole fact by itself is already pretty devastating, as Huawei is blocked from conducting any business with Google, the company behind Android development and Google Play services (software is also considered an export), as well as with companies like Qualcomm. But for the most part, the company has managed to stay afloat, mainly in part thanks to the fact that they can source most of their components from places outside the US and they have access to Android since it's open-source software.

Now, though, the company may be facing serious trouble as the Trump administration keeps trying to intervene in the company's affairs with non-US companies, two sources familiar with the matter told Reuters. The newest measures against Huawei, which have reportedly been drafted but are still far from being approved, might come in the form of a modification to the Foreign Direct Product Rule, which oversees foreign-made goods based on American technology. Under this proposal, foreign companies using American chipmaking equipment would need to seek a license from the US government before supplying equipment to Huawei.

Such a restriction could have catastrophic consequences for Huawei as a whole. One of the companies that would be affected by this is TSMC, which uses American chipmaking equipment while being based in Taiwan. Huawei has managed to keep putting out smartphones since the entirety of their lineup uses HiSilicon Kirin processors, designed in-house by Huawei, instead of Qualcomm processors. The problem is, however, that Kirin chips, such as the Kirin 990 powering the Mate 30 and Mate 30 Pro, are manufactured by TSMC. If the US government goes forward with this, then this would effectively cut Huawei's chip supply completely, thus hampering the company's ability to manufacture and ship new devices almost completely.

TSMC is just a manufacturer, though, and it is Huawei themselves, through its subsidiary HiSilicon, who owns the chip's designs. So can they just go to another chipset maker, such as Samsung Foundries? The answer is -- it's complicated. The new measure is not specific to any company in particular, and if Samsung Foundries is using US chipmaking equipment, then they would also be affected by this change. It is almost certain, however, that Huawei would have a hard time going forward if this change is approved, as the same report takes cognizance of a claim that there are no production lines in China that use only equipment made in China, making it difficult to produce any chipsets without U.S. equipment.

Huawei is right in the middle of the United States-China trade war, with the US government having major concerns regarding Huawei because of charges such as spying. As of now, though, these new sanctions have not entered into effect yet as they are just a draft right now, but we'll keep you in the loop on any new developments regarding this story.

Source: Reuters

Update: USA may move forward with the chip block for Huawei

After the news (reported above) initially broke out, there was a brief lull in this regards as the US President pushed back against approving the modification to the Foreign Direct Product Rule. Under the proposal, foreign companies using American chipmaking equipment would need to seek a license from the US government before supplying equipment to Huawei.

Now, the US administration is renewing the push for these modifications to be approved, in the backdrop of tit-for-tat actions by the governments against the others' subjects.

The proposed rule change is aimed at curbing the sales of chips to Huawei by TSMC, which is a major producer of chips for Huawei's HiSilicon. Most chip manufacturers rely on equipment produced by U.S. companies such as KLA Corp, Lam Research and Applied Materials. However, the exact impact of the rule change will remain unknown until the technical thresholds within the rule are clarified, as different foundries make different chips at different technical capabilities.

Source: Reuters