How Do New US Restrictions Affect Huawei Users Worldwide?

Published May 19th, 2020 - 03:00 GMT
How Do New US Restrictions Affect Huawei Users Worldwide?
Huawei has already been suffering more than a 40% drop in sales during the first quarter of 2020. (Shutterstock: Ink Drop)

Despite White House statements reassuring the world that the US-Chinese trade deal "is continuing," the world can't help but notice the growing tensions between the two major economies, following US accusations of China "providing misinformation" in the wake of the Coronavirus outbreak.

The January deal, which calmed 18 months of economic rivalry, seems particularly at stack now especially as the US restrictions target, yet again, the Chinese giant phone maker Huawei.

Over the last few weeks, US President Donald J. Trump has continuously blamed China for the growing global death toll and the dangerously shrinking economy, all triggered by the virus that first originated in Wuhan last December.

Last Friday, The US issued newly tightened export controls, that aim to limit Huawei's ability to purchase needed types of equipment needed for manufacturing its devices.

In an announcement made by the U.S. Commerce Department, all non-US chip makers, who use American chip making equipment, intellectual property, or design software will require to apply for a special license that determines whether they can sell chips to Huawei.

This new rule is expected to create major difficulties for many of the company's affiliates including HiSilicon's manufacturer Taiwan Semiconductor Manufacturing Company, TSMC, which will, in turn, threaten future production processes of smartphone devices.

According to Asia Times, the ban is also expected to affect the company's operations related to radiofrequency devices that power Huawei's 5G base stations.

Although the new rule does grant TSMC and other companies a grace period of 120 days to deliver items that have already been in production, it's expected to have a huge impact on Huawei's future.

The Chinese smartphone manufacturer; the first ever to release 5G-supporting devices, has already been suffering more than a 40% drop in sales during the first quarter of 2020, mainly due to the global shutdown meant to help governments contain COVID-19 outbreak.

In the latest round of the trade war between the United States and China, Huawei was forced to release several devices without being supported with the Google-made Android operating system, eventually causing their sales to endure a major plunge, especially outside of China.

The world's second-largest phone manufacturer's ability to continue to make new models, without US-made or TSMC chips, might actually be a real obstacle the company has yet to overcome.

Less than a month ago, Huawei had announced that it's exploring new options to be able to face the US crackdown, including obtaining chips from South Korea's Samsung.

Moreover, the Chinese manufacturer just began working with the Shanghai-based chip maker Semiconductor Manufacturing International Corp SMIC, which has been providing Huawei with the Kirin 710A for its 14nm FinFET process.

Last Friday, and coinciding with the US decision, Reuters reported a $2.2 billion investment by the Chinese government in SMIC, which suggests that Huawei might soon be able to acquire all equipment needed for its technologies from local firms. Yet, it remains unclear how long it will take for the company to recover from this latest US hit. 

Additionally, the success and efficiency of SMIC chips are yet to be tested in the company's first devices utilizing chips made by the Shanghai-based chip maker.

The fate of Huawei's current operations remains in limbo, especially as the company's first response fails to address specific future plans.

Huawei rotating chairman Guo Ping couldn't assure the press in his first response to the US decision, saying that his company "might not survive this hit," describing the American controls as "arbitrary and pernicious."

Also, it remains unclear if this US decision was merely a response to the Chinese continuous refusal to claim responsibility for the worldwide outbreak of COVID-19, or if it's part of large-scale US trade tariffs against the country, which could result in even stricter limitations.

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