Huawei hit with new set of sanctions
WASHINGTON — The Trump administration issued new rules Friday that will bar Huawei and its suppliers from using U.S. technology and software, a significant escalation in its battle with the Chinese telecommunications giant and one that is expected to inflame tensions with Beijing.
The rule changes will prevent companies from selling chips to Huawei that are made with U.S. manufacturing equipment or based on designs that are the product of U.S. software and technology, the Commerce Department said. Companies can apply for a license to continue supplying products to Huawei, but the administration said the presumption will be to deny those requests.
While the restrictions could have sweeping implications, semiconductor industry executives and analysts said they are waiting to analyze the detailed text of the rule, which was expected to be released late Friday.
The move seemed aimed at inflicting further damage on Huawei, which continues to rely on U.S.made machinery and software designs to make the chips for its smartphones and tablets,
as well as the companies that supply it. The Trump administration has singled out Huawei as a threat to national security, saying that its gear should not be trusted because it is beholden to the Chinese government, an accusation the company has denied.
The measure comes on top of several restrictions taken against Huawei in the past year. The administration added the Chinese telecom giant to an “entity list” last May, barring exports of U.S. products to Huawei and 114 of its affiliates unless suppliers had first obtained a license.
After that rule was imposed, Huawei took steps to reduce its reliance on U.S. chip manufacturers like Qualcomm and increase its inhouse production through a chip unit, HiSilicon.
But HiSilicon still relies on outside manufacturers, including Shanghai’s Semiconductor Manufacturing International Corp. and Taiwanese chip maker TSMC, to massproduce chips to its specifications. And many of those operations rely to some extent on technology that was developed and refined in the United States, where the semiconductor industry originated.
The Commerce Department said Friday that Huawei had tried to “undermine” its previous restrictions by using U.S. software and technology to make its own semiconductors, and by purchasing products from foreign foundries that use U.S. equipment.
“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,” Wilbur Ross, the commerce secretary, 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.”
While the scope of the measure remains unclear, it could weigh on major chip contract manufacturers that sell to Huawei, particularly Semiconductor Manufacturing International and TSMC, which rely heavily on U.S. manufacturing tools. It may also clamp down on sales by makers of semiconductor equipment, like Applied Materials of Santa Clara, KLA Corp. of Milpitas and Lam Research of Fremont, as well as chip design software companies.
Kevin Wolf, a partner at Akin Gump and a former Commerce Department official, called the rule a “novel, complex expansion of U.S. export controls.” But he said the regulation would only apply narrowly to chips that are designed by Huawei and its affiliates and thus would not affect other items made by U.S. or foreign companies outside the United States that are now sold to Huawei.
The move comes at a moment of heightened tensions between the United States and China. President Trump has blamed China for not doing enough to stop the spread of the coronavirus and has suggested the United States may punish the Chinese government. Trump has also begun threatening to scrap the trade deal the two countries signed in January.
“This came from China,” Trump said at a White House event to discuss a vaccine Friday. “It should have been stopped in China before it got out to the world.”
The new measure against Huawei, one of China’s biggest technology companies and a crown jewel of Chinese innovation, could also prompt a backlash against U.S. technology companies that depend on sales to China, such as Qualcomm of San Diego and Cupertino’s Apple.
On Friday evening, the English edition of Chinese statecontrolled newspaper Global Times cited an unnamed source who said that the Chinese government is prepared to retaliate against the new U.S. moves.
“Based on what I know, if the U.S. further blocks key technology supply to Huawei, China will activate the ‘unreliable entity list,’ restrict or investigate U.S. companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes,” Hu Xijin, editor in chief of the Global Times, wrote on Twitter.
In a call with reporters Friday, a State Department official said that the United States had broad concerns about Huawei, including that it had violated U.S. sanctions on Iran and helped the Chinese government construct a surveillance network within China and abroad. Huawei is key to the Chinese government’s broad strategy of “civil military fusion” that supports the Chinese Communist Party’s global ambitions, the official said.
In a statement Friday, Sen. Ben Sasse, RNeb., called the rule change “long overdue.”
“The United States needs to strangle Huawei,” he said. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs. This is pretty simple: Chip companies that depend on American technology can’t jump into bed with the Chinese Communist Party.”
Huawei had no immediate comment. The Commerce Department is collecting feedback from companies on the rule, which is not set to take effect for 120 days.
The move came shortly after an announcement Thursday night that TSMC had agreed to build a $12 billion manufacturing facility in Arizona, in response to the Trump administration’s growing concerns about the security of the global electronics supply chain.
Secretary of State Mike Pompeo said in a statement that the deal would increase U.S. economic independence from China and strengthen the U.S. relationship with Taiwan, a selfgoverning island claimed by Beijing.
The Commerce Department extended for another 90 days a license that has allowed U.S. companies to continue doing business with Huawei temporarily. It warned this would be the final extension.
“There has been a very highly technical loophole through which Huawei has been able ... to use U.S. technology.”
Commerce Secretary Wilbur Ross