TSMC has halted new orders from Huawei in response to new US export controls

Taiwanese Semiconductor Manufacturing Co, the world’s largest contract semiconductor maker, has stopped taking new orders from Huawei Technologies, one of its largest customers, according to the Nikkei Asian Review. The report said the decision was made to comply with new United States export controls, announced last Friday, that are meant to make it more difficult for Huawei to obtain chips produced using U.S. technology, including manufacturing equipment.

Orders taken before the ban or already in production will not be affected, if they can ship before September 14. Huawei, the world’s largest telecom equipment maker, is TSMC’s second-biggest customer after Apple. TSMC makes many of the advanced chips used by Huawei, including in its smartphones.

The move is a hard blow for Huawei, who depends on TSMC to make most of the chips designed by its HiSilicon subsidiary and are essential for its devices. Huawei chairman Guo Ping admitted in a press statement that he expects the company’s business will “inevitably be impacted,” and noted that by attacking a “leading company from another country,” the US acted against the interests of Huawei’s customers and several global industries.

Guo further explained that “in its relentless pursuit to tighten its stranglehold on our company, the US government has decided to proceed and completely ignore the concerns of many companies and industry associations. […] This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries.”

Last year, Huawei bought $18.7 billion worth of hardware and software from US suppliers, who have been doing their best to go around the export rules.

Recently, there have been reports that China would retaliate against the new rules from the US Commerce Department that affects the supply chain of local companies. However, TSMC told Reuters they were “purely market rumor,” while Chinese state investors have committed $2.2 billion towards Shanghai-based Semiconductor Manufacturing International, effectively securing a 50.1 percent ownership.

This is the latest restriction the U.S. government has leveled against Huawei citing national security concerns. Along with ZTE, Huawei was identified as a potential threat to security by the House Intelligence Committee in 2012.

The two companies have denied the charges, but under the Trump administration, the U.S government’s efforts to stop both from doing business with U.S. companies has intensified. According to the Nikkei Asian Review report, Huawei anticipated the Commerce Department’s new orders and has been building a year’s worth inventory of chips needed for its telecom equipment.

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