The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced plans to restrict Chinese vendor Huawei’s ability to use U.S. chipmaking equipment and software to design and manufacture its semiconductors abroad.
In a statement, BIS said that the move “cuts off Huawei’s efforts to undermine U.S. export controls,” and that the government agency is amending its longstanding foreign-produced direct product rule and the Entity List to “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
Huawei was added to the Entity List in May 2019, after the Department of Commerce concluded that the vendor was engaged in activities that were contrary to U.S. national security or foreign policy interests.
However, the U.S. government believes that Huawei has continued to use U.S. software and technology to design semiconductors and says that the company is therefore “undermining the national security and foreign policy purposes of the Entity List by commissioning their production in overseas foundries using U.S. equipment.”
“Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort. However, that effort is still dependent on U.S. technologies,” said Secretary of Commerce Wilbur Ross. “We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”
Under the new regulation, companies using U.S. chipmaking technology — including foreign chipmakers –will be required to obtain a license before supplying components to Huawei. BIS also said that a waiver will be granted for items already in production as of May 15, provided that they are shipped within 120 days. However, as CNBC reported, there is no indication that BIS will actually provide such licenses, and the new rules will have a huge impact on Huawei due to its heavy reliance on Taiwan’s TSMC, which uses American equipment to manufacture the majority of Huawei’s smartphone chips.
“This decision by the U.S. government does not just affect Huawei. It will have a serious impact on a wide number of global industries. In the long run, this 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 in a statement.
“Huawei is undertaking a comprehensive examination of this new rule. We expect that our business will inevitably be affected. We will try all we can to seek a solution. We hope that our customers and suppliers will continue to stand with us and minimize the impact of this discriminatory rule,” Huawei added.
Also, the Department of Commerce announced that it will extend the Temporary General License (TGL) for Huawei and its non-U.S. affiliates which are subject to the Entity List, until August 13.
The TGL authorizes U.S. companies to make specific, limited engagements in transactions involving the export, reexport, and transfer of items to the Chinese vendor. The initial TGL was granted in May 19, 2019 and had been extended several times since then.
“The 90-day extension provides an opportunity for users of Huawei devices and telecommunication providers—particularly those in rural U.S. communities—to continue to temporarily operate such devices and existing networks while hastening the transition to alternative suppliers,” DoC said.
“The Department is also notifying the public that activities authorized in the TGL may be revised and possibly eliminated after August 13, 2020. Companies and persons relying on TGL authorizations should begin preparations to determine the specific, quantifiable impact of elimination if they have not done so already.”
Outside of the scope of the TGL, any exports, reexports, or in-country transfers of items subject to the Export Administration Regulations (EAR) will continue to require a license, if granted, after a review by BIS under a presumption of denial, the Department of Commerce said. However, this general license does not cover transactions between U.S. semiconductor manufacturers such as Qualcomm, Intel and Micron and Huawei. These companies are required to apply for special permits in order to continue supplying chips to the Chinese vendor.
China’s Global Times newspaper on Saturday quoted a source close to the Chinese government as saying that China was ready to take a series of countermeasures against Washington, such as putting U.S. companies on an “unreliable entity list” and imposing restrictions on U.S. companies including Apple, Cisco Systems and Qualcomm.
