Samsung & HK Hynix To Stop Selling Chips To Huawei

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In the latest blow to Huawei, South Korean chip manufacturers Samsung and HK Hynix will reportedly cease all trades with the Chinese company beginning next week. This comes after the US Department of Commerce last month announced an amendment to the trade restrictions it imposed on Huawei back in May.

According to reports from various Korean news outlets, the companies will suspend trade on September 15th. That's when the new set of rules come into effect. The rules bar any American or non-American company that uses a US-origin software or technology from selling components to Huawei. Any such trade would require the companies to obtain special approval from the American government.

TSMC has reportedly already suspended trades with Huawei following the first round of restrictions in May. With Samsung and HK Hynix also now forced to stop selling components to the Chinese giant, it poses a serious threat to the company's smartphone business.

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Huawei will now have little-to-no options for securing DRAM and NAND flash memory chips. It may no longer be able to make its Kirin chipsets for smartphones. Domestic semiconductor company SMIC could have been an alternative supplier for Huawei. However, the Trump Administration has threatened to put SMIC in the Entity List as well. The largest Chinese semiconductor foundry company recently secured an investement from the nation's state-backed investors.

Huawei does have a long-term plan to become self-sufficient in the software department, including the Harmony OS and Huawei Mobile Services (HMS). However, it's immediate survival is now under threat because of a string of trade restrictions by the US government since May last year. The company is already expecting a steep decline in smartphone sales next year.

Not just Huawei, but Samsung and HK Hynix lose too

Trade restrictions on Huawei affect the business of its suppliers as well. The Chinese giant recently rose to the top spot in the list of the largest smartphone vendors in the world. It overthrew Samsung from the top spot as the latter struggled to move units off the shelves during the COVID-19 pandemic.

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While Huawei's troubles are beneficial for Samsung, it is also a considerable loss for the Korean company's semiconductor arm. Huawei had emerged as one of its biggest memory chip clients in recent years.

HK Hynix is probably a bigger loser of the two. It is sort of a win-lose situation for Samsung but not for the other Korean semiconductor company. More than 40-percent of its sales in the first half of 2020 reportedly occurred in China, with Huawei being a major customer.

The US-China trade war isn't showing any signs of slackening in the near future. It remains to be seen how Huawei copes with it.

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