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Laurie Clarke

Reporter

New US restrictions on Huawei set to disrupt global tech sector

The US has introduced more restrictions on Huawei in an effort to limit its ability to obtain computer chips made using US technology, even if they were not specifically tailored for the Chinese telecoms company.

It is the latest in the US’s efforts to stem the supply of electronic components to the company, damaging its supply chains and injuring parts of its business.

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In  statement, Secretary of State Mike Pompeo said the new restrictions “will prevent Huawei from circumventing US law through alternative chip production and provision of off-the-shelf chips.” He added that “Huawei has continuously tried to evade” the US restrictions imposed in May.

According to May’s restrictions, global chipmakers that used US technology had to obtain a licence from the US government to work on custom designs for Huawei. The latest executive order expands this – and demands suppliers obtain licenses even for off-the-shelf general purpose chip designs. The move is designed to close loopholes that allowed the firm to obtain technology through third parties.

“As we have restricted its access to US technology, Huawei and its affiliates have worked through third parties to harness US technology in a manner that undermines US national security and foreign policy interests,” US Commerce Secretary Wilbur Ross said in a Department of Commerce press release.

“This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so.”

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Huawei has previously warned investors the restrictions would “inevitably” hurt its business and even put its survival at stake, as well as damaging the global tech industry.

Global Data telecoms analyst John Byrne said: “This is a significant disruption that impacts suppliers in the US, Taiwan, and elsewhere, and also creates a chilling effect where no one knows what the next shoe to drop will be. It is also highly likely to invite counter-measures from the Chinese government that are likely to impact [the] ability [of firms] to sell into the Chinese market, such as Apple.”

Analysts told Reuters that the latest move would have a disruptive effect on the global supply chain and threaten to topple Huawei from its position as the world’s largest smartphone maker. If the company is unable to source chips, its handset business could even disappear.

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US machines from companies such as Materials and Lam Research are used by approximately 40 per cent of the world’s chipmakers. Meanwhile, some 85 per cent use software from American companies including Cadence, Synopsis and Mentor, according to Credit Suisse. That could leave almost no fabrication plants still able to work with Huawei.

The Chinese tech giant announced earlier this month that it would halt production of its Kirin chipsets from September because US sanctions are making it impossible for HiSilicon (Huawei’s semiconductor affiliate) to keep producing the chipsets that are essential components in mobile phones.

This is because HiSilicon relied on software from US companies to design the chips and had outsourced production to Taiwanese chipmaker TMSC, which also uses US equipment. TSMC has said it will not ship wafers to Huawei after 15 September.

The new restrictions also strike a blow to global chip suppliers in the near term because they will have to apply for licenses if they use any US technology. In the long term, they will also injure the business of any firms that count Huawei as a prominent customer (such as MediaTek, a semiconductor company whose shares fell 10 per cent on Tuesday).

The US has been waging an all-out war on Huawei, urging its allies including the UK to cut ties with the firm and bar it from their 5G networks. It claims the company is a national security threat and provides intelligence to the Chinese government – something Huawei has always denied. Huawei alleges that the US crusade is in fact driven by geopolitical and economic motives rather than national security concerns.

In a further fracturing of Sino-American relations, the US recently announced the expansion of its ‘clean network’ initiative that aims to remove Chinese companies, including mobile carriers, telecoms companies, apps and cloud-based storage firms, from the US tech ecosystem.

Huawei had not provided comment at the time of publishing.