U.S. Government Attempts to Strangle Huawei; China-U.S. Trade War likely to Accelerate into HYPER-DRIVE mode

On Friday, the U.S. government said it would impose export restrictions designed to cut off Chinese tech giant Huawei Technologies Co. from overseas suppliers, threatening to ignite a new round of U.S.-China trade tensions.  The U.S. Commerce Department said its new sanctions would “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

These new restrictions stop foreign semiconductor manufacturers whose operations use U.S. hardware, software and technology from shipping products to Huawei without first getting a license from U.S. officials, essentially giving the U.S. Commerce Department a veto over the kinds of technology that Huawei can use.

The restriction further tightens the U.S. export-control system’s existing rules related to Huawei. Washington alleges that Huawei gear could be used by Beijing to spy globally, which Huawei has repeatedly denied.

A logo of Huawei retail shop is seen through a handrail inside a commercial office building in Beijing.

Photo credit: Andy Wong, Associated Press


U.S. Commerce Secretary Wilbur Ross said Friday that Washington wants to prevent Huawei from evading sanctions imposed earlier on its use of American technology to design and produce semiconductors abroad.  “There has been a very highly technical loophole through which Huawei has been able, in effect, to use U.S. technology with foreign fab producers,” Ross said in an interview on Fox Business Network. He said the changes announced Friday were tailored moves “to try to correct that loophole and make sure that the American fab foundries are competing on an equal footing with the foreign ones.”

Also on Friday, a senior administration official said there were “legal, human rights, and strategic rationales” for the actions against Huawei. Those included Huawei’s alleged theft of intellectual property and aid in developing surveillance technology and new weapon systems, the official said.

Under the new rules, the department can block the sale of semiconductors manufactured by Taiwan Semiconductor Manufacturing (TSMC) for Huawei’s HiSilicon subsidiary, which designs chips for the company, as well as chips and other software produced by manufacturing facilities in Taiwan, China and South Korea, which use American chip-making technology. The Commerce Department already had the ability to license software shipments from U.S.-based facilities.

Companies can apply for a license to continue supplying tech products to Huawei, but the administration said the presumption would be to deny those requests.

John Neuffer, the president of the Semiconductor Industry Association, which represents chip makers, said his group was concerned that the rule would “create uncertainty and disruption for the global semiconductor supply chain.” He added, however, that it appeared less damaging than broader approaches the administration had previously considered.

Huawei had no immediate comment.

China’s foreign ministry, in a statement, urged the U.S. to immediately halt “its unreasonable suppression against Huawei.”

“The U.S.’s practices not only harm the legitimate rights and interests of Chinese enterprises, but also do not accord with the interests of U.S. enterprises, and cause damage to the global industrial chain, supply chain and value chain,” it said.


On Sunday, China’s commerce ministry said it will take “all necessary measures” in response to new U.S. restrictions on Chinese tech giant Huawei’s ability to use American technology, calling the measures an abuse of state power and a violation of market principles.

An unidentified spokesperson quoted Sunday in a statement on the China ministry’s website said the regulations also threatened the security of the “global industrial and supply chain.”

“The U.S. has utilized national power and used the so-called national security concern as an excuse, and abused export controls to continue to suppress some particular companies in other countries,” China’s commerce ministry said in today’s statement.

“China urges the U.S. to immediately cease its wrong actions,” the ministry added, calling the restrictions a “serious threat to global supply chains.”

China’s retaliation could take the form of restrictions on U.S. tech firms (Qualcomm, Apple. Intel, Nvidia, AMD, Broadcom, Cisco, even Boeing) selling their products in China.

Victor Gao, vice-president of the Centre for China and Globalisation, a Beijing-based think tank, said there were many ways in which China could retaliate for the new restrictions on Huawei, including selling its huge holdings of U.S. treasury bonds or halting any future purchases, and tightening its controls on Apple products.

“For example, if Beijing declared that all Apple products made in China had to be inspected, which would delay their shipment, in three months, Apple would be dead,” he said.


China’s state-run newspaper reported on Sunday that the Chinese government was ready to retaliate against the U.S..  The source, who is described as close to China’s government, told the state-run Global Times that China was planning countermeasures, such as “imposing restrictions” against U.S. companies like Apple, Cisco, and Qualcomm. The source also suggested the possibility of China halting Boeing airplane purchases.

“China will take forceful countermeasures to protect its own legitimate rights” if the Trump administration goes ahead with the plan to block essential suppliers of semiconductors from selling those components to Huawei.



U.S. government officials have repeatedly accused Huawei of stealing American trade secrets and aiding China’s espionage efforts, ramping up tensions with the rival superpower while both sides were involved in a long-simmering trade war.

As a result, Huawei has increasingly relied on domestically manufactured technology, but the latest rules will also ban foreign firms that use US technology from make semiconductors to Huawei without US permission.  The new restrictions will cut off Huawei’s access to one of its major suppliers of semiconductors- Taiwanese chipmaker TSMC (world’s largest silicon foundry).


May 18th UPDATE:

Huawei on Monday assailed the latest U.S. move to cut it off from semiconductor suppliers as a “pernicious” attack that will put the Chinese technology giant in “survival” mode and sow chaos in the global technology sector.

“The decision was arbitrary and pernicious and threatens to undermine the entire (technology) industry worldwide. This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries,” Huawei said in a statement.

The ban also went against the US government’s claim that it is motivated by network security, the company said.

“The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests,” said Huawei.










9 thoughts on “U.S. Government Attempts to Strangle Huawei; China-U.S. Trade War likely to Accelerate into HYPER-DRIVE mode

  1. A few comments-
    1. ALL chip manufacturing factories irrespective of their geographies use at least some equipment that is supplied by American companies. If the US government position to ban all chips, which are manufactured using its companies’ equipment, prevails then Huawei will soon be out of business! BUT, this will also cause revenue losses worth tens of billions to the US chip & equipment manufacturers.
    2. IMO, the proposed AZ TSMC facility is likely to be on a technical par with several TSMC facilities in Taiwan, but, relatively small compared to the total TSMC capacity. Therefore the proposed US ban would be meaningful only if all TSMC factories are affected.
    3. This US salvo or threat is not going to remain unanswered by China. The trade imbalance between the two countries is heavily tilted toward China but China imports from US are over $120B. Additionally, a good deal of US imports from China disproportionately benefit the high profile, US brand companies, like Apple.

  2. From Lightreading: IAIN MORRIS, International Editor 5/18/2020

    Huawei’s current priority is to “seek survival,” said a top executive at the Chinese equipment maker, after the US government announced tough new measures that will block its access to critical suppliers of components for consumer and network products.

    Guo Ping, one of the equipment vendor’s rotating chairmen, said his business was not self-reliant despite the huge increase it made in research and development spending last year. “Huawei is capable of designing some products and ICs [integrated circuits] but is not capable of doing a lot of things. Therefore, currently the priority for Huawei is to seek survival,” he told an audience of analysts and reporters during a briefing from China today.

    The remarks came just days after the US government said it would close loopholes in its export controls by restricting Huawei’s ability to buy any components made with US technology.

    That marks an apparent escalation of the campaign against the Chinese vendor by the Trump government, which has so far sought to restrict Huawei’s access to US products.

    Under the new rules, Huawei would be unable to buy components from non-US firms that rely on US technology in their manufacturing processes, including Taiwanese semiconductor giant TSMC.

    “We must amend our rules exploited by Huawei and HiSilicon [Huawei’s chipmaking subsidiary] and prevent US technologies from enabling malign activities contrary to US national security and foreign policy interests,” said US Commerce Secretary Wilbur Ross in a statement.

    The blockade against shipments from TSMC, which makes semiconductors at the behest of other firms, could be devastating to Huawei, according to several industry analysts.

    In a recent article for Seeking Alpha, Robert Castellano, the president of market research firm The Information Network, estimated that Huawei was responsible for about 15% of TSMC’s $34.6 billion in annual revenues, making it the Taiwanese company’s biggest customer after Apple.

    In a lengthy statement issued today, Huawei said its business would “inevitably be affected” by the changes to US regulations, while also warning of the impact on networks that use Huawei equipment and the consequences for US interests.

    “This new rule will impact the expansion, maintenance and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries,” said Huawei’s statement. “In the long run, this will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries … Ultimately, this will harm US interests.”

    Guo said US sanctions so far had wiped about $12 billion off Huawei’s sales last year, when it reported about $123 billion in revenues, and that securing contracts had become more difficult as a result of the US campaign.

    Year-on-year sales growth at the Chinese vendor, described as a security threat and trade cheat by US opponents, slowed to just 1.4% for the first three months of 2020, to about 182.2 billion Chinese yuan ($25.6 billion), after growing 39% in the year-earlier quarter. Net profit was down about RMB1.1 billion ($150 million), to RMB13.3 billion ($1.9 billion).

    The company has responded by investing an even bigger sum in research and development spending, which soared 30% last year, to RMB131.7 billion ($18.5 billion). To amass inventory, it also spent a whopping $18.7 billion on US components, 70% more than in 2019, as it took advantage of loopholes in US regulations to continue trading.

    Using the sort of colorful metaphors that have become a feature of Huawei’s public statements, Guo said Huawei was currently like a plane riddled with bullet holes. “Patching up the holes has been the priority over the past year. We are confident in continuing to fly with the plane.”

    Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.
    US moves have sparked fears of retaliation by China’s government, whose Ministry of Commerce was today reported to have said it is ready to set up its own “unreliable entity list,” restricting US companies such as Apple, Cisco and Qualcomm.

    That report comes a few weeks after Eric Xu, another of Huawei’s rotating chairmen, warned that China’s government would respond if the US tried cutting Huawei off from TSMC.

    “The Chinese government will not stand by and watch Huawei get slaughtered on the chopping board and they may also take some counter measures,” he said, suggesting that authorities might seek to ban the use in China of 5G chips and smart devices provided by US firms. “This type of destructive ripple effect on the global industry would be astonishing.”

    Earlier today, TSMC was said to have halted all new orders from Huawei in response to the latest US measures.

    On Friday, the Taiwanese semiconductor firm announced plans for a $12 billion manufacturing plant in Arizona following talks with the US government.

    Earl Lum, an analyst with EJL Wireless Research, previously told Light Reading that blocking Huawei’s access to TSMC would turn the current trade war into a far worse conflict. “If you start messing with TSMC, whatever trade war is going on right now will escalate substantially,” he said. “I don’t see a positive outcome of that at all.”

    China’s government could retaliate by targeting companies outside the technology sector. One option would be to make further cutbacks to the purchase of US agricultural products, hurting US farmers in the Trump heartlands of the Midwest.

    As a long-term strategy, it could also devalue the yuan in an attempt to boost Chinese exports and cripple rival producers.


    1. Huawei has slammed the Trump administration’s move to restrict its access to global semiconductor supplies that use US equipment, IP or software. In a strongly-worded statement, the Chinese telecommunications giant described the US Commerce Department’s decision to amend the longstanding foreign-produced direct product rule as “arbitrary and pernicious,” adding that the US government’s “discriminatory” actions could undermine a number of global industries as well as the trust international companies place in US technology and supply chains. “Ultimately, this will harm US interests,” claimed the Huawei spokesman.

  3. Huawei issue is intimately related to the TSMC deal to build in AZ, and both are related to 5G deployment. It’s a hairball of complexity, but clearly motivated to bring back entire supply chains for 2 reasons:
    1. National security
    2. Serious problems operating Just in Time supply chains when there is any disruption. Duh!

    1. Taiwan Semiconductor Manufacturing (TSMC) has stopped taking new orders from Huawei, the Nikkei Asian Review reported, with sources saying the move comes after the US government confirmed its intent to restrict the Chinese’s company’s use of US tech and software for the design and manufacture of its semiconductors abroad. The sources said company is halting new orders to comply with the latest export control regulation, but that orders already in production, and those taken before the new ban, will continue, as long as the chips can be shipped before mid-September.

  4. This article was superb in all aspects of how it was organized and written. There have been many “back up actions” taken by the United States government against Huawei. All initiated by the Trump administration- not Congress which supposedly makes laws for the U.S.

    What will the repercussions be like? China has already reacted as article states, but will there be full scale retaliations against American companies like Qualcomm, Apple, Intel, Broadcom, Boeing, etc?

    Also, how can this U.S. Commerce Dept order be enforced against foreign semiconductor foundries (e.g. Taiwan’s TMSC, Korea’s Samsung, China’s SMIC) that are making chips for HiSilicon (Huawei’s semiconductor subsidiary which is 1 of the top 10 global semiconductor companies)? Those foundries are NOT doing business in the U.S. even though they use semiconductor equipment from U.S. companies (e.g. Applied Materials, KLA Tencor, LAM Research, etc).

    Bravo to the author, who always backs up the main points of the story with research and supportive facts plus analyst opinions.

    We’ll all have to stay tuned to see if the U.S.-China trade war escalates as the author presumes it will.

  5. Back in 2014 or 2015, Huawei was deployed across the US by major telecom carriers. Their price was very competitive, and the amount of transport bandwidth it offered back then was unsurpassed. We’re talking 100Gb and 400Gb services wavelengths traveling across the country on a single fiber, where the previous highest transmission rate was limited to 40Gb.

    Think about how many fibers are in a single cable going cross country. 96 count, 144 count typical on metro rings.

    The problem was, the US government restricted Huawei network equipment so that it would not be installed in any US Military base/data center. The reason given was that there were 2 circuit cards in certain Huawei transport nodes whose purpose was not published by the vendor.

    Unfortunately, even after these restrictions were set by the US government, large telecommunications firms were installing them in military bases across the US.

    It freaked me out back then, and only now is it coming to light in the press as a side headline.

  6. China retaliation:

    China is prepared to take “forceful countermeasures” against Apple and Qualcomm following US trade restrictions against Huawei – escalating US-China trade tensions.

    The proposed countermeasures include launching “endless investigations” against the US firms, placing the companies on a list of “unreliable entities,” and subjecting them to legal scrutiny under China’s anti-monopoly law.

    These developments will push US-China trade tensions to new heights, instigating a bifurcation in smartphone vendor supply chains. Now that it has been cut off from TSMC in addition to US-based suppliers, Huawei will effectively need to remake its supply chain using China-aligned vendors. This will be a huge undertaking — Huawei purchased $18.7 billion from US suppliers in 2019, and presently it lacks fully viable China-based substitutes.

    The top contender at the moment appears to be China-based Semiconductor Manufacturing International Corporation (SMIC) — just this week, SMIC received a $2.3 billion investment from the Chinese government to support the development of more advanced manufacturing capabilities, and Huawei selected SMIC to manufacture its lower-tier Kirin 710A chips. But SMIC is much smaller than TSMC, and has yet to develop the 5nm manufacturing capabilities required to produce the most advanced chips for flagship smartphones, according to The Verge.

    The decoupling of supply chains would push countries to restrict access to their markets based on US-China alignment. The placement of manufacturing facilities has been a significant bargaining chip for smartphone vendors looking to gain access to the world’s largest markets. In India, for instance, Apple and Samsung opened manufacturing facilities to unlock more favorable market access, including lower tariffs. As Huawei looks to develop an independent smartphone supply chain, it will likely leverage manufacturing opportunities to establish more favorable access to consumer markets.

    If smartphone supply chains continue to divide in response to the escalation of US-China trade tensions, then access to consumer markets could become increasingly dependent on the manufacturing alignment of that country. This would significantly diminish the target markets for the top global smartphone vendors, sequestering Apple and Samsung from the likes of Huawei, Xiaomi, and vivo.


  7. UK reportedly planning to phase out Huawei equipment from its 5G networks
    Members of Parliament pushed for the Chinese telcom’s tech to be removed from UK networks by 2023

    UK Prime Minister Boris Johnson is apparently preparing to phase out the use of Huawei equipment from the UK’s 5G networks, the Financial Times reported. Citing national security concerns, members of the UK’s Conservative party have pushed for Huawei technology to be removed from the UK’s 5G infrastructure and the rest of its telecom network by 2023.

    The Trump administration has banned government use of Huawei’s technology, and the president signed an executive order last May blocking US companies from buying foreign-made telecommunications equipment that may pose national security risks. The order doesn’t single out any one company, but is viewed as a way to exclude Chinese firms like ZTE and Huawei from doing business in the US. Last week, Trump extended the ban through May 2021.

    The US has argued that Huawei could build backdoors into network infrastructure, ostensibly to aid spying efforts by the Chinese government, a charge Huawei has repeatedly denied.


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