The US government’s trade ban on Huawei was meant to bring the company to its knees both as punishment for its alleged cybersecurity crimes as well as a bargaining chip in trade talks with China. For the past 12 months, however, Huawei has found some ways to get around some of those restrictions to maintain its business. Over the weekend, the US Commerce Department dealt what could be the most crippling blow to the company, and, unsurprisingly, Huawei has responded with accusations that the US is attempting to strengthen its technology industry by crushing everyone else’s.
The new rules that the Commerce Department announced strikes at the very heart of Huawei’s businesses, both mobile as well as networking hardware. In a nutshell, it prohibits US companies from providing even materials that chip makers need in order to produce processors if those products will eventually end up in Huawei’s hands or its affiliates like HiSlicon, makers of its Kirin chipsets. This could effectively put Huawei’s entire business in jeopardy considering how critical these chips are.
Unsurprisingly, Huawei’s response to the new rule points out how it won’t be the only one adversely affected. If it doesn’t get the chips it needs, not only would it be prevented from making new products, it would also be hindered in supporting existing ones. More than just phones, it would be prevented from maintaining and supporting the existing networking hardware that is still in use not just in the US but also around the globe.
Huawei also has words to say about how the amended Foreign Direct Product Rules effectively throw global industries into chaos. One such fallout has already been TSMC, one of the largest fabricators in the market, who has reportedly ceased accepting new orders from Huawei immediately.
For its part, the Chinese tech giant is still not down for the count as it could resort to relying on other chip suppliers, including Samsung and China’s own Semiconductor Manufacturing International Corporation (SMIC). The transition will take a long time, however, as these alternatives have yet to catch up with TSMC’s lead. Ironically, the US government’s move could force other companies to start looking for new suppliers and toolchains outside the country which could also hurt US companies in the long run.