The Trump administration has dealt another major blow to Huawei Technologies Co. by curtailing its chip supply, an escalation of its campaign against the Chinese company that may also hurt Taiwan Semiconductor Manufacturing Co.
The Commerce Department said it was tightening rules “to narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
Last year, citing national security concerns, the U.S. put Huawei on an “Entity List,” requiring U.S. companies to obtain a special license to sell products to the Chinese company. The move has largely frozen Huawei out of getting some of the computer chips it needs to make equipment integral to new high-speed wireless networks.
“However, Huawei has continued to use U.S. software and technology to design semiconductors, undermining the national security and foreign policy purposes of the Entity List by commissioning their production in overseas foundries using U.S. equipment,” U.S. Secretary of Commerce Wilbur Ross said in a statement Friday.
A Huawei representative said the company had no immediate comment.
The new restrictions constrain the entire contract chipmaking industry because they all use equipment from U.S. vendors Applied Materials Inc., Lam Research Corp. and KLA Corp. in wafer fabrication plants.
It steps up an ongoing White House campaign to contain Chinese technology giants viewed as a threat to national security, particularly Huawei — the company at the heart of a global fifth-generation network rollout and Beijing’s Made in China 2025 effort to lead the development of future technologies.
More U.S. restrictions could inflict further damage on Huawei. The Shenzhen-based company in April reported growth had all but evaporated in the first quarter, after the Covid-19 pandemic wiped out demand for the gadgets that drive its revenue.
Huawei’s chip-design unit, HiSilicon, is capable of crafting cutting-edge semiconductors that power its mobile devices and base stations, a key part of 5G infrastructure, but it depends on TSMC for production.
Huawei may able to source some of its lower-end chip orders back to local foundry Semiconductor Manufacturing International Corp., but has no recourse in the advanced processors for which TSMC was the sole manufacturer.
U.S. officials have moved to bar Huawei network gear citing security threats, an assertion the company has consistently denied. They’ve also limited sales by American chipmakers and software companies to Huawei under the Entity List system, in a bid block use of its equipment and smartphones worldwide.
All global chipmakers, including TSMC and China’s own SMIC, need gear from U.S.-based companies to fabricate chips for everything from smartphones to supercomputers.
But the latest measure affects TSMC disproportionately because it counts on Huawei for about 10% of its revenue, according to Bloomberg’s supply chain estimates.
“We are following the U.S. export rule change closely,” TSMC said in a statment. “The semiconductor industry supply chain is extremely complex, and is served by a broad collection of international suppliers.
As part of the global semiconductor ecosystem, TSMC maintains long-term collaborations with equipment partners around the world including those located in the United States.”
In late March, Huawei rotating Chairman Eric Xu warned that China will retaliate should the U.S. move to restrict sales by TSMC to his company. “I don’t think the Chinese government will just watch and let Huawei be slaughtered on a chopping board. I believe the Chinese government will also take some countermeasures,” he said.