New sanctions imposed by the US have now restricted Huawei's access to the latest technology and advanced microprocessor chips. The US Commerce Department announced these fresh sanctions, which restrict the sale of chips containing US-developed technology to Huawei.
As such, any foreign semiconductor manufacturer will not be able to sell chips to Huawei, if these are developed using US software or technology. However, the sanctions include a caveat – the manufacturer would need to obtain a license first before supplying any technology to Huawei.
Earlier sanctions issued in May this year prevented Huawei from procuring chips from Taiwan Semiconductor Manufacturing (TSM) company. The restrictions prevented Taiwan Semiconductor Manufacturing Company from making and supplying HiSilicon designed chips to Huawei.
Incidentally, Huawei fully owns the Chinese semiconductor company, HiSilicon. HiSilicon is one of the most reputed domestic designers of integrated circuits in China.
US Sanctions cut off Huawei chip supply
With these new sanctions in place, Huawei will not be able to procure chips from Taiwan's MediaTek as well. Unsurprisingly, this resulted in MediaTek's shares to plunge nearly 9% on the Taiwan Stock Exchange.
MediaTek is the second-largest semiconductor manufacturer and has been a crucial supplier for Huawei's smartphone business. Other suppliers to Huawei also saw their shares plunging on Monday.
Novatek Microelectronics, which designs integrated circuits, and Largan Precision, which makes camera lenses dipped by 8% and 3% respectively.
Incidentally, Huawei has been facing resistance from the US government due to its alleged links to the Chinese government. Over the last few years, Huawei has expanded its footprint across the globe in consumer networks as well as through smartphone sales.
This expansion resulted in several governments to start looking at Huawei as a potential national security threat. In 2012, a US Congressional panel raised the first espionage allegations against Huawei. The panel cited the possibility of "backdoors" in Huawei supplied telecom gear.
In 2018, a Senate Intelligence Committee hearing warned about potential security threats emanating from Huawei's telecom equipment. Consequently, the Committee discouraged American companies from conducting business with both Huawei and ZTE (another Chinese telecom major with close ties to the Chinese government).
Since early this year, President Donald Trump has been mounting pressure on China by banning the sale of Huawei's equipment to American suppliers. The US is pushing other governments to follow suit and ban Huawei products citing espionage concerns.
Huawei has continuously denied that its equipment has "backdoors" which can be used to spy on existing users. As such, the Chinese major has also submitted its technology for review to European auditors.
Washington says Huawei tried to evade US restrictions imposed in May.
The US Commerce Secretary, Wilbur Ross, had said that Huawei tried to procure semiconductor chips from third parties, evading the original restrictions imposed in May. Consequently, the US Commerce Department framed these new rules to restrict Huawei's access to semiconductors and chips.
The US Secretary of State, Mike Pompeo, clarified that with the new rules, Huawei would be unable to circumvent US law.