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New U.S. Sanctions Tighten the Noose on Huawei

May 18, 2020

Move to restrict access to chips, components marks latest salvo in escalating tech trade war with China

Officials in China are scrambling today to understand the full impact of a Friday decision by U.S. Department of Commerce officials to sharply restrict tech giant Huawei’s access to global chipmakers.

The move comes as Washington looks to close loopholes officials say Huawei leverages to circumvent existing sanctions aimed at limiting the Chinese vendor’s access to sensitive and proprietary semiconductor designs developed using U.S. software and technology.

According to multiple published reports, Commerce officials said the new rules will go into effect after a 120-day grace period and will require Huawei and its affiliates to get trackable licenses for a host of chips and components deemed critical to U.S. national security.

“This announcement cuts off Huawei’s efforts to undermine U.S. export controls,” the Commerce Department said in a statement on Friday. The U.S. will “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

The restrictions affect not only U.S.-sourced goods sold to the networking and smartphone maker, but also components from key Huawei suppliers like Taiwan Semiconductor Manufacturing Company (TSMC), which relies on American semiconductor components and production equipment.

The new sanctions on Huawei came just hours after U.S. officials announced TSMC intentions to invest $12 billion in a U.S.-based nanometer semiconductor foundry.

China’s Ministry of Commerce issued an ominous statement Monday saying it would protect “the legitimate rights and interests of Chinese enterprises” but offered few other details.

Saying his company is still working to “understand the impact” of the new restrictions, Huawei chairman Guo Ping told analysts in a conference call Monday that the tech vendor’s “business will inevitably be impacted.”

“In spite of that, the challenges over the past year have helped us develop a thicker skin, and we are confident about finding solutions soon,” Guo said.