Huawei's future uncertain as it cannot use TSMC for chip manufacturing

Last year the Trump administration issued a ban on Huawei and ZTE and blamed the companies for spying on U.S citizens. The ban later went through various iterations but it prevented USA based companies from doing business with Huawei and ZTE. Last week, U.S government extended the ban on Huawei for another year. On Friday, U.S Department of Commerce banned TSMC, the world’s largest contract manufacturer of semiconductors, from serving Huawei and its affiliates throughout the world.

Despite the ban which was announced last year, Huawei was using U.S. software and technology to design semiconductors, specifically it had production of chips in overseas foundries using U.S. equipment. So, U.S government is now changing the rules exploited by Huawei and HiSilicon.

This targeted rule change will make the following foreign-produced items subject to the Export Administration Regulations (EAR):

• Items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and
• Items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List (e.g., HiSilicon), that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States.  Such foreign-produced items will only require a license when there is knowledge that they are destined for reexport, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.

“Huawei categorically opposes the amendments made by the U.S. Department of Commerce to its foreign direct product rule that target Huawei specifically. In the long run, [the U.S. ban] will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries.” Huawei said during its summit in China.

Source: US Gov