US tightens the noose on Huawei's ability to make chips

It seems that things are going from bad to worse for Huawei, now including its smartphone business. Not only has its temporary general license expired last week, the US government is now also issuing more restrictions that will practically cut off Huawei's ability to produce its own silicon for its smartphones.The US Commerce Department just added 38 Huawei affiliates to the country's Entity List, extending the new rule it announced last May that prevented sales of semiconductor materials and parts to Huawei, directly or indirectly.

The Foreign-produced Direct Product or FDP rule announced last May put a hold on Huawei's ability to buy semiconductors or components that are a direct product of US software or technologies. That covers a rather broad spectrum of materials, so broad that it practically incapacitated Huawei's HiSilicon from further producing new Kirin chips.

According to Huawei itself, the Mate 40 series launching later this year could very well be the last to use its remaining Kirin processors.

The Commerce Department, however, accused Huawei of using evasive measures to circumvent that rule, which is still set to take effect in September. Huawei allegedly went through third parties and foreign firms to get around the restriction. In response, the US government is adding 38 more of Huawei's affiliates to the country's blacklist, requiring a license for the sale of any product made or developed using US software or technology.

This announcement comes at a time when economic and political relations between China and the US are at its lowest, with the fate of social networks TikTok and WeChat also hanging in the balance.

Semiconductor groups and market analysts, however, warn about the chilling effects of the new rules on the US' own semiconductor industry and companies. Qualcomm was earlier reported to be lobbying for an exception to provide 5G chips to Huawei, fearing the advantage that rivals like MediaTek and Samsung would have in markets outside the US.

Unsurprisingly, the US government and President Trump himself are unfazed by warnings about the repercussions on US companies and its economy in the long run. The Commerce Department has yet to announce that it has granted any such license to sell products to Huawei but it did confirm it has no plans to extend the temporary general license any further.