U.S Set to Cut Down Chip Supply to Huawei

The antagonism between the United States and Chinese tech giant Huawei Technologies seems to be far from over. It all started when the U.S accused the company of using its infrastructure and services to spy for Beijing.

Senior State’s Officials Meeting

Anytime soon U.S will be cutting down supply of chips to the company after a meeting held by senior officials in President’s Trumps administration concluded to curtail global supply of chips to embattled Huawei.

Making matters worse, this comes at a time when the world’s two largest are pointing fingers on each other on who is to blame for emergence of coronavirus pandemic.

Following the meeting, the officials proposed that any foreign company using chip making equipment from the U.S will have to secure a license from the government of the United States before supplying any chip to Huawei.

Among the officials who attended this meeting included top officials from the National Security Council and the U.S. Departments of State, Defense, Energy and Commerce.

Citing an attendee from the meeting, the officials reached a consensus to change the Foreign Direct Product Rule which allows foreign countries to manufacture goods and services using technology or software made in the United States.

President’s Trump Uncertain position

While addressing a press conference last month President Trump seemed to have taken an opposite direction in matters regarding Huawei where he hinted of a possible scenario where his government may not be placing additional restrictions to the Chinese tech giant.

So, national security is very important. I’ve been very tough on Huawei, but that doesn’t mean we have to be tough on everybody that does something. I want our companies to be allowed to do business. I mean, things are put on my desk that has nothing to do with national security, including with chipmakers and various others. So we’re going to give it up, and what will happen? They’ll make those chips in a different country or they’ll make them in China or someplace else,” said President Trump.

It’s still unclear if the President has changed his stand against Huawei once again and if he will sign the bill when placed on his own desk.

Citing a last year report by Chinese firm Everbright Securities, most of chip makers around the globe depend on equipment produced by the United States such as Applied Materials, Lam Research and KLA Corp.

Impact.

According to trade lawyer Doug Jacobson, this move might end up inflicting more damage on U.S companies than it will affect Huawei.

This is going to have a far more negative impact on U.S. companies than it will on Huawei, because Huawei will develop their own supply chain. Ultimately, Huawei will find alternatives,” said Jacobson.

Kevin Wolf, Washington based lawyer and former Commerce Department official, says at this point one can’t really tell how the move might impact on both parties.

It’s impossible to tell the impact until we know the technical thresholds that may apply. Different foundries make different chips at different capabilities so you wouldn’t know which foundries are affected the most until you know the technical thresholds,” said Wolf.

 

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