U.S. Tightens Restrictions on Huawei’s Access to Chips

(WSJ) The U.S. Commerce Department issued new rules curbing Huawei Technologies Co.’s access to foreign-made chips, expanding the Trump administration’s restrictions on the Chinese telecom company’s link to crucial components.

The new rules prohibit non-U.S. companies from selling any chips made using U.S. technology to Huawei without a special license. The rule covers even widely available, off-the-shelf chips made by overseas firms, placing potentially severe new limits on Huawei’s ability to source parts.

President Trump on Monday reiterated his concerns—long voiced by the national security community and denied by Huawei—that the company’s telecom equipment could be used to spy on Americans.

“We don’t want their equipment in the United States because they spy on us,” he said during an interview Monday on “Fox & Friends.” “They know everything—they knew everything we were doing. Huawei is a way of—is really—I call it the spyway.”

While Washington has long worried that Huawei could use its networks to conduct espionage for the Chinese government, U.S. security officials haven’t provided public evidence that Huawei is actively spying on behalf of Beijing.

Huawei has said it has never spied on behalf of any country and would refuse any request to spy for Beijing. Huawei “has never and will never do anything that would compromise or endanger the security of networks and data of its clients,” the company said earlier this year.

The new restrictions build on a series of previous Trump administration rules designed to curtail Huawei’s ability to obtain components made with U.S. technology.

In May, the Commerce Department restricted Huawei from acquiring chips built with U.S. technology and software for the company’s own use. The rule targeted Huawei’s access to Taiwan Semiconductor Manufacturing Co., the world’s largest manufacturer of chips.

Commerce Department officials said Monday’s new rules were intended to cut off Huawei’s efforts to find workarounds to earlier restrictions—for example, by seeking out foreign chip makers to replace its own self-designed chips.

“The rule today amends that rule and attempts to capture Huawei backfilling its indigenously designed chips with chips from other manufacturers,” a Commerce Department official said during a call with reporters.

Also Monday, Commerce officials added another 38 Huawei affiliates in 21 countries to its “Entity List,” which prevents companies from exporting U.S. technology to those entities without a license. Huawei itself was added to the list last year.

A Huawei spokesman didn’t immediately comment on the expanded restrictions.

Huawei is the world’s largest maker of telecom equipment, and in the second quarter edged out Samsung Electronics Co. to become the largest seller of smartphones, too. The company has become a leader in 5G technology, even as Washington has long regarded its products as a national security threat.

The curbs potentially put the U.S. semiconductor industry’s billions of dollars worth of annual global sales at greater risk. Industry giants such as San Diego-based Qualcomm Inc. have been lobbying the Trump administration to ease the earlier restrictions—not strengthen them—to keep business from gravitating to foreign competitors.

The Semiconductor Industry Association’s chief executive, John Neuffer, said that the changes “will bring significant disruption to the U.S. semiconductor industry.”

“We are surprised and concerned by the administration’s sudden shift from its prior support of a more narrow approach intended to achieve stated national security goals while limiting harm to U.S. companies,” he said in a statement, adding that sales to China give U.S. companies the profits to innovate.

While Monday’s restrictions expand the earlier rules, it is unclear how deeply the new ones will hurt U.S. chip makers’ business. The strength of the new rules will depend on how Commerce Department officials implement them as they review the license applications and decide whether to grant them, industry officials said.

“The intent seems to be to seriously ratchet up the pressure on the company,” said Paul Triolo, head of global technology policy at Eurasia Group, referring to Huawei. “If they can’t get access to semiconductors, then it’s game over.”

Despite the workarounds, Huawei has said the U.S.’s earlier restrictions are affecting its supply chain. Richard Yu, the head of Huawei’s consumer-device business, said on Aug. 7 that the manufacture of its self-designed Kirin smartphone chips would cease on Sept. 15, the deadline for chip manufacturers to ship Huawei-designed components.

“After September 15 of this year, our flagship chips cannot be produced,” he said. “Everyone knows about this situation. Our high-end chips, with powerful AI and computing capabilities, cannot be manufactured. This is a very big loss for us.”

Trump administration officials have been pressuring allied governments to restrict Huawei from building their next-generation 5G networks. Earlier this year, the U.K., a longtime Huawei customer, reversed its stance on Huawei and blocked the company from its 5G rollout.

Source: Wall Street Journal by Dan Strumpf and Katy Stech Ferek

U.S. Tightens Restrictions on Huawei’s Access to Chips U.S. Tightens Restrictions on Huawei’s Access to Chips Reviewed by TechCO on 8/18/2020 Rating: 5

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