China escalation will be bad for tech industry - Huawei

Wednesday, 20 May, 2020

Last year, the USA government placed Huawei and its 114 affiliates on an "Entity List", citing national security concerns.

The Commerce Department issued new guidelines on Friday barring any non-American chipmaker from supplying Huawei Technologies Co. without first getting approval from the U.S. government.

"We have serious questions as to how this project takes into consideration national security requirements and how it aligns with a broader strategy for building a diverse U.S. semiconductor manufacturing supply chain", the men wrote of the TSMC plan.

Washington's decision drew condemnation from Beijing, which regards Huawei as a national champion because of its success in dominating global networking technology.

But Huawei is particularly vulnerable when it comes to obtaining the cutting-edge chips it needs to produce its high-end phones.

Some experts say they expect to see a change of law or regulation to create such a list in the upcoming National People's Congress, one of China's most important political events.

Huawei is TSMC's second biggest client behind only Apple (AAPL), representing 15% to 20% of TSMC's annual revenues. That was an 80% year-over-year increase.

TSMC will still be able to ship to Huawei the 5nm Kirin chipsets that will be used in the Huawei Mate 40 series this fall.

Guo's comments come after Washington said it would require licences for sales to Huawei of chips made overseas but with USA technology. A recent report claims that it had placed huge orders to the tune of $700 million from TSMC.

Huawei and the USA have been tussling a trade war that saw the Chinese phone maker and telecoms provider feature in America's Entity List.

Meanwhile the Nikkei Asian Review reports that TSMC has stopped taking new orders from Huawei as a direct result of the United States ban.

The U.S. Commerce Department issued a statement on Friday to amend an export control rule that "strategically targets Huawei's acquisition of semiconductors that are the direct product of certain U.S. software and technology". Ultimately, this will harm USA interests. But it would appear that TSMC is following along with the wishes of the Trump administration and has thrown Huawei under the bus.

Last week, TSMC confirmed plans to build a $12 billion facility in Arizona, with a three-year construction period slated to begin in 2021.

U.S. restrictions against Huawei could devastate the Chinese technology giant and escalate tensions between Beijing and Washington already heightened amid the coronavirus pandemic.

The trade war between the US and China may be slated to become far more damaging soon.

According to Guo, Huawei spent US$18.7 billion on goods from USA suppliers past year and "will continue to buy" from them, if Washington allows.