U.S. intensifies crackdown on Huawei, cutting it off from chip suppliers
August 25, 2020 Category Foreign trade, Weekly
The U.S. Department of Commerce issued new rules that would prevent Huawei from acquiring chips developed or produced with U.S. technology and software, a move that analysts say essentially cuts off supplies of key components for smartphones to Huawei. The new rule was an extension of an earlier ban imposed in May to bar companies from using U.S. technology and software to make chips designed by Huawei. The U.S. also did not extend a waiver temporarily allowing U.S. companies to still buy Huawei-made spare parts and components, and added another 38 Huawei affiliates to the U.S. Entity List, banning them from purchasing U.S. products.
Some analysts said the new measures would make it impossible for Huawei to do business. The new rules, designed to prohibit Huawei from bypassing earlier sanctions by sourcing products via third party buyers, will essentially choke off the company’s ability to acquire semiconductors developed or produced using U.S. technology. With Huawei’s avenues for sourcing critical semiconductors to power its 5G base stations, smartphones and now its cloud computing business shut off, analysts said there were very few options left. Gu Wenjun, Chief Analyst at Shanghai-based semiconductor research firm ICwise, said Huawei’s only long term option was to build a complete semiconductor supply chain itself but agreed that it would be “mission impossible to build a semiconductor foundry without using any U.S. technology”.
So far, China did not retaliate, but Chinese Foreign Ministry Spokesperson Zhao Lijian called the U.S. move a “naked act of hegemony” and accused the U.S. of being the “real empire of hacking.” “We urge the U.S. to immediately correct their wrongdoing, stop slandering and smearing China and halt cracking down on Chinese companies. The Chinese government will continue to take necessary measures to protect the legitimate rights and interests of Chinese companies,” Zhao said. Though the latest U.S. ban on Huawei has put the company’s major businesses – telecom equipment and smartphones – in a highly uncertain situation, the Chinese company has been operating normally and steadily moving forward in spite of tremendous pressure, the Global Times reports. In the U.S., the Semiconductor Industry Association (SIA), which represents 95% of the U.S. semiconductor industry, also voiced concern over the new U.S. rule. “We are still reviewing the rule, but these broad restrictions on commercial chip sales will bring significant disruption to the U.S. semiconductor industry,” SIA CEO John Neuffer said in a statement. Experts said that the new rules, if implemented, could also affect chipmakers in South Korea and other places, posing a serious threat to the global supply chain of semiconductors, including U.S. companies like Qualcomm and Intel, as they would lose Huawei as a client. In 2018, Huawei spent USD70 billion on component procurement, of which USD11 billion went to U.S. companies such as Qualcomm, Intel and Micron. The worst case scenario for Huawei would be shutting down some consumer businesses, while continuing its core business of telecom equipment manufacturing, particularly for 5G. The Chinese government is considering targeting U.S. companies, including Qualcomm, Apple, Boeing and Cisco, if the U.S. moves to cut off chip supplies to Huawei, the Global Times warned.
The move against Huawei comes as the Trump administration threatened to ban TikTok if its U.S. operations are not sold to a U.S. company by September 15.
Huawei Technologies launched a new MateBook X in Shanghai, as its mobile business sustains a major blow from the U.S.’ tightened microchip ban. The laptop, with a price starting from CNY7,999 – its first with wifi-6 compatibility and its lightest weighing only 1 kilogram – was released at the company’s first offline launch event since the coronavirus outbreak. The new Matebook has its own MacOS-like feature called Huawei Share, enabling it to seamlessly transfer files between Huawei devices, as well as serve as an alternate screen for Huawei smartphones. Huawei also launched new Matebook 13 and 14 laptops, as well as a Matebook B specifically designed for enterprise users. Huawei’s laptops are still using Intel processors and Microsoft’s Windows operating system, but the company is developing its own ecosystem for PCs – known as Qingyun – which could evolve to be a potential replacement for Windows, and also a key component of the HarmonyOS, which would be used on all devices. Huawei’s Qingyun ecosystem already has nearly 500 items of China-made software and hardware. Huawei’s developer site also displayed an image of a desktop model using the company’s own 24-core ARM-based Kunpeng 920 CPU.
This overview is based on reports by the Global Times, South China Morning Post, China Daily and Shanghai Daily.
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