Given that the Trump administration crippled Huawei’s access to US technology last year, the government has gone further to clamp down on chip design division, HiSilicon. The chip design company is Huawei’s major semiconductor manufacturer, but the recent government action will limit its access to the technology necessary for its operations.

Huawei is the largest telecommunications equipment vendor in the world and got fried in a crossfire of trade war between the United States and China. The US government’s blacklist of Huawei dealt a terrible blow on the Chinese company’s global smartphone business and its ambition to be the pioneer and driver of 5G technology worldwide. The latest sanction on HiSilicon is a further blow to Huawei’s smartphone operations and China’s business interests.

Huawei called the US government’s restriction on HiSilicone as “arbitrary and pernicious”. Since its establishment in 2004, HiSilicon had manufactured most of the electronic chips used in Huawei smartphones and telecommunication machines. Given the company’s massive growth over the years, the organization now employs 7,000 workers and emerged Huawei’s major partner for technological dominance in the smartphone and emerging 5G equipment market worldwide.

Following the Trump administration’s restrictions on Huawei’s US technology last year, HiSilicone has been largely instrumental to the company’s continued relevance and operations on a global level. HiSilicone stepped up to produce most of Huawei’s chips until its access is restored again to US technology. Earlier this year, Huawei disclosed that 8% of the 50,000 5G base stations it sold in 2019 contained HiSilicon chip components instead of those from other US manufacturers.

Since HiSilicone will be unable to acquire chip design software from US companies and unable to use Taiwan Semiconductor Manufacturing Company to manufacture its chips, the company will no longer be able to produce chips and will lose its leading-edge, said Stewart Randall of Intralink, a Shanghai-based consultancy.

Insiders said the US export control rule on HiSilicone will not be effective until 120 days from now, allowing Huawei to stockpile chips that could be used for smartphones and 5G technology in the meantime. However, industry sources revealed that HiSilicon can continue utilizing design software it already obtained and that the chipmaker may need new US licenses to access newer technologies.

Analysts familiar with the sanction on HiSilicone said it is possible for the company’s chip fabricators such as the Taiwan Semiconductor Manufacturing Company to ship manufactured chips to third parties on behalf of HiSilicone for onward transmission to Huawei. But US officials said they are aware of this workaround and will be ready to block it if it ever attempted, effectively putting HiSilicon and Huawei in a tight corner as far as chips for smartphones and transmission technologies are concerned on a global scale.

Source: scmp.com