The U.S. trade ban placed on Huawei and its subsidiary companies hasn’t fared well for the second-largest smartphone manufacturer in the world. With no access to Google Mobile Services, the company has faced resistance in markets apart from China. Now, according to a report by Reuters, the Trump administration has blocked the shipment from global chipmakers to Huawei.
The U.S. Commerce Department has amended an export rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
The department further added that the “announcement cuts off Huawei’s efforts to undermine U.S. export controls.”
Huawei’s HiSilicon chipsets that power most Huawei and Honor smartphones are produced by Taiwan-based Taiwan Semiconductor Manufacturing Company (TSMC). Now, under the rule change, foreign companies that make use of U.S. chipmaking equipment – including TSMC – will have to obtain a license from the U.S. Commerce Department.
The block placed on exporting these silicon wafers is effective for chips produced after Friday. Wafers that have already been produced will be allowed to ship to Huawei within 120 days from Friday (May 15). But according to a research note by analysts at Crispidia Research, TSMC is expected to lose Huawei’s business because of these newly imposed restrictions.
The Tension Keeps Building
The COVID-19 pandemic has heightened Washington’s fear of reliance on Asia for advanced chips and how it needs to protect its supply chains from disruption, as reported by Wall Street Journal. This has led the administration to adopt a two-pronged strategy that limits China’s access to chip technology while also promoting the production of these chips in America itself.
Until now, TSMC produced most of its chips – produced by giants like Apple, Nvidia, and Qualcomm – at its headquarters in Hsinchu in Taiwan. But the Trump administration has been successful in convincing TSMC to move its production to American shores. TSMC has announced its plans to build a $12 billion semiconductor factory in Arizona.
It was only a year ago that TSMC CEO Mark Liu stated they had pushed back against U.S. expansion citing steep costs as the reason. But American being the biggest market for the Taiwanese chipmaker – accounting for over 59% of its sales, and the pressure from Trump’s administration has probably led the foundry to establish shop in the States.
Trump’s administration also very recently extended the trade ban on Huawei and its subsidiaries through May 2021 by invoking the International Emergency Economic Powers Act. Although the Commerce Department – warning that this might be the final extension – has also extended a temporary license that allows U.S. companies to continue doing business with Huawei through August 13
While Huawei hasn’t commented on this new development yet, Huawei Chairman Eric Xu recently told reporters on March 31 that “the Chinese government will not just stand by and watch Huawei be slaughtered on the chopping board.”
Huawei has been ramping up local production by sourcing their needs from Shanghai-based Semiconductor Manufacturing International Corp (SMIC). Until now, all HiSilicon chips were manufactured by TSMC. But, in anticipation of more restrictions from the U.S. administration, Huawei had gradually been shifting production of chips to the local manufacturer.
As reported by The Global Times, the Huawei Kirin 710A chip that is based on a 14nm technology – and produced by SMIC – achieved commercial mass production. It’s also claimed to be the first Chinese chip with independent intellectual property rights.
Considering that chipmakers such as TSMC and Samsung have already 7nm FinFET processes since 2018 and 2019, SMIC has a long way to go ahead. Either way, SMIC is currently seen as the strongest Chinese alternative to TSMC right now. But analysts say that having worked closely with TSMC before, Huawei can help pass on valuable knowledge to SMIC.