Trump blocks ways for Huawei to acquire US chip technology through third parties

The Trump administration is further tightening restrictions on China’s Huawei, seeking to starve it of crucial components by cutting off all access to US technology.

As many as 38 Huawei affiliates were added on Monday to an existing list of companies banned from receiving some sensitive technologies. The Commerce Department also ended an exemption that had allowed some Huawei customers in the US to keep using its equipment and software.

“We don’t want their equipment in the United States because they spy on us,” President Donald Trump told Fox News on Monday. “And any country that uses it, we’re not going to do anything in terms of sharing intelligence.”

Washington cut off Huawei’s access to US components and technology, including Google’s music and other smartphone services, last year. Those penalties were tightened in May when the White House barred vendors worldwide from using US technology to produce components for Huawei.

Huawei declined to comment on the latest US action.

The president of its consumer unit, Richard Yu, said this month Huawei is running out of processor chips for its smartphones. Huawei designs its own chips but Yu said production of the most advanced, the Kirin series, would stop Sept. 15 because the company relies on outside manufacturers that use American technology.

Huawei removed US-supplied components from its main products following earlier sanctions that blocked access to American technology. This week’s sanctions extends those controls to Asian and European components if their manufacturing process uses US technology, which is common.

But the Commerce Department said Monday that more restrictions were needed because Huawei has “continuously tried to evade” the earlier sanctions by using technology supplied by third parties. The new rule is designed to block Huawei’s access to commercially available chips made with tools acquired from the US.

“The new rule makes it clear than any use of American software or American fabrication equipment to produce things through Huawei is banned, and requires a licence,” Commerce Secretary Wilbur Ross told Fox Business on Monday. “It’s really a question of closing loopholes to prevent a bad actor from access to US technology, even if they try to do it in a very indirect, very tricky manner.”

Huawei, founded in 1987 by a former military engineer, denies accusations it might facilitate Chinese spying. Chinese officials accuse Washington of using national security as an excuse to stop a competitor to US tech industries.

“We urge the United States to immediately correct its mistakes, stop slandering China and stop suppressing Chinese companies,” Chinese foreign ministry spokesman Zhao Lijian said. “The Chinese government will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese companies.”

Vendors including Taiwan Semiconductor Manufacturing Corp (TSMC), the biggest contract chip producer, have been scrutinising their supply and manufacturing lines since the latest US restrictions were proposed in May.

Huawei is one of the biggest customers of US and other suppliers of chips and components. They stand to lose billions of dollars in potential sales.

Nicole Peng of industry research firm Canalys said vendors she contacted Tuesday were still examining their supply lines and whether they could do business with Huawei. She said some rely on the Chinese company for up to half their sales.

Elsa Kania, a fellow at the Center for a New American Security who focuses on technology and US-China relations, said while there are valid security concerns about Huawei, the Trump administration’s increasingly drastic measures against it and other Chinese companies don’t have a clear rationale.

“If the objective is to kill Huawei regardless of the collateral damage to American companies, then this measure is one step closer to that,” she said. “A lot of companies caught in the crossfire of this will see real damage.”

The Semiconductor Industry Association, a trade group representing American chipmakers, said in a statement Monday that the rule will cause “significant disruption” to the industry.

The action targets Huawei but could have sweeping reach, said Kevin Wolf, who was assistant secretary of commerce for export administration under President Barack Obama.

“Every foreign-made semiconductor of any type anywhere in the world is now subject to US license requirements if a Huawei company is in any way involved, directly or indirectly, in the transaction,” said Wolf, a partner at the Washington law firm Akin Gump.

Washington has combined its economic sanctions on Huawei with a lobbying campaign pushing allies in Europe and elsewhere to exclude the company from planned next-generation wireless networks.

Trump referred to Huawei as “the spy way” as he spoke with “Fox & Friends” hosts Monday. He took credit for Britain’s recent move to backtrack on plans to give the company a role in the UK’s new high-speed mobile phone network.

“We said we love Scotland Yard very much but we’re not going to do business with you because if you use the Huawei system that means they’re spying on you,” Trump said. “That would mean they’re spying on us.”