New Rule To Prevent Huawei Off From Global Chip Suppliers By US Administration

A move to completely block the Chinese telecom company Huawei, blacklisted by the United States government, from chip supplies was initiated by the Trump administration which ignited fears of a Chinese retaliation and pulling down shares of chipmaking equipment makers of the US.

The authority of the Trump administration to require licenses for sales to Huawei of semiconductors made abroad with US technology was expanded through a new rule unveiled by the US Commerce Department. This new measures vastly expanded the reach of the Trump administration to stop exports of the second largest smartphone maker of the world.

“This action puts America first, American companies first, and American national security first,” a senior Commerce Department official told reporters in a telephone briefing on Friday.

There were no comments available from Huawei, the world’s biggest maker of telecoms equipment.

There was however swift reaction from China as the state controlled Global Times reporting that Beijing was ready to put US companies on an “unreliable entity list” in retaliation to the new laws implemented against Huawei.

The report, citing sources, claimed that the Chinese government was contemplating launching of investigations and imposing restrictions on a host of US companies such as Apple Inc., Cisco Systems Inc. and Qualcomm Inc., and halting purchase of aircraft from Boeing.

Taiwan Semiconductor Manufacturing Co Ltd. (TSMC), the biggest contract chipmaker and key Huawei supplier, was also hit by the Commerce Department’s latest rule which came into effect from Friday but had a 120-day grace period. just a day ago TSMC announced setting up of a chip making factory in the US.

It is “following the U.S. export rule change closely” and working with outside counsel to “conduct legal analysis and ensure a comprehensive examination and interpretation of these rules,” TSMC said on Friday.

The new rule was formulated to prevent Huawei from its continuous undermining of its status as a blacklisted company, the department said, which meant that suppliers of US-made sophisticated technology needs ot obtain a license from the US government before selling it to Huawei.

“There has been a very highly technical loophole through which Huawei has been in able, in effect, to use U.S. technology with foreign fab producers,” Commerce Secretary Wilbur Ross told Fox Business Network on Friday, calling the rule change a “highly tailored thing to try to correct that loophole.”

The US Commerce Department had added Huawei to its “entity list” last year over its concerns that the equipment supplied by Huawei was a threat to the country’s national security. Even as the US claimed that the Chinese firm had violated its sanctions on Iran. Huawei had repeatedly refuted the charges.

There were reports in the media in November about a strong feeling among some in the Trump administration that the black listing was not doing enough to deter the access of Huawei to supplies which prompted this latest effort to impose further curbs on the Chinese company.

The rule appeared to be a “novel, complex expansion of U.S. export controls” for chip-related items that are manufactured abroad with US technology and are sold to Huawei, said Washington lawyer Kevin Wolf, a former Commerce Department official.

(Adapted from JapanTimes.com)

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