US moves to cut Huawei off from global chip suppliers

Development spurs fears of Chinese retaliation, hammers US chip-making shares

WASHINGTON: The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies, spurring fears of Chinese retaliation and hammering shares of US producers of chip-making equipment.

A new rule, unveiled by the Commerce Department and first reported by Reuters, expands US authority to require licenses for sales to Huawei of semiconductors made abroad with US technology, vastly expanding its reach to halt exports to the world’s number two smartphone maker.

“This action puts America first, American companies first, and American national security first,” a senior Commerce Department official told reporters in a telephone briefing on Friday.

Huawei, the world’s top telecoms equipment maker, did not respond to a request for comment. News of the move against the firm hit European stocks as traders sold into the day’s gains, while shares of chip equipment makers such as Lam Research and KLA Corp closed down 6.4% and 4.8%, respectively, in US trading.

The reaction from China was swift, with a report on Friday by China’s Global Times saying Beijing was ready to put US companies on an “unreliable entity list,” as part of countermeasures in response to the new limits on Huawei.

The measures include launching investigations and imposing restrictions on US companies such as Apple Inc, Cisco Systems Inc and Qualcomm Inc, as well as suspending purchases of Boeing Co airplanes, the report said, citing a source.

The Commerce Department’s rule, effective Friday but with a 120-day grace period, also hits Taiwan Semiconductor Manufacturing Co Ltd, the biggest contract chipmaker and key Huawei supplier, which announced plans to build a US-based plant on Thursday.

TSMC said on Friday it is “following the US export rule change closely” and working with outside counsel to “conduct legal analysis and ensure a comprehensive examination and interpretation of these rules.”

The department said the rule is aimed at preventing Huawei from continuing to “undermine” its status as a blacklisted company, meaning suppliers of US-made sophisticated technology must seek a US government license before selling to it.

“There has been a very highly technical loophole through which Huawei has been in able, in effect, to use US technology with foreign fab producers,” Commerce Secretary Wilbur Ross told Fox Business Network on Friday.  

Published in The Express Tribune, May 17^th, 2020.

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