U.S. tightening restrictions on Huawei access to technology

The U.S. Commerce Department actions, first reported by Reuters, will expand restrictions announced in May aimed at preventing the Chinese telecommunications giant from obtaining semiconductors without a special license – including chips made by foreign firms that have been developed or produced with U.S. software or technology.

The administration will also add 38 Huawei affiliates in 21 countries to the U.S. government’s economic blacklist, the sources said, raising the total to 152 affiliates since Huawei was first added in May 2019.

Commerce Secretary Wilbur Ross told Fox Business the restrictions on Huawei-designed chips imposed in May “led them to do some evasive measures. They were going through third parties,” Ross said. “The new rule makes it clear that any use of American software or American fabrication equipment is banned and requires a license.”

Secretary of State Mike Pompeo said the rule change “will prevent Huawei from circumventing U.S. law through alternative chip production and provision of off-the-shelf chips.” He added in a statement “Huawei has continuously tried to evade” U.S. restrictions imposed in May.

Huawei did not immediately comment.

With U.S.-China relations at their worst in decades, Washington is pushing governments around to world to squeeze Huawei out, arguing it would hand over data to the Chinese government for spying. Huawei denies it spies for China.

The new actions, effective immediately, should prevent Huawei’s attempts to circumvent U.S. export controls, Commerce said.

It “makes clear that we’re covering off-the-shelf designs that Huawei may be seeking to purchase from a third-party design house,” one Commerce Department official told Reuters.

A new separate rule requires companies on the economic blacklist to obtain a license when a company like Huawei on the list acts “as a purchaser, intermediate consignee, ultimate consignee, or end-user.”

The department also confirmed it will not extend a temporary general license that expired Friday for users of Huawei devices and telecommunication providers. Parties must now submit license applications for transactions previously authorized.

The Commerce Department is adopting a limited permanent authorization for Huawei entities to allow “ongoing security research critical to maintaining the integrity and reliability of existing” networks and equipment.

Existing U.S. restrictions have already had a heavy impact on Huawei and its suppliers. The May restrictions do not fully go into effect until Sept. 14.

On Aug. 8, financial magazine Caixin reported Huawei will stop making its flagship Kirin chipsets next month due to U.S. pressure on suppliers.

Huawei’s HiSilicon division has relied on software from U.S. companies such as Cadence Design Systems Inc (CDNS.O) and Synopsys Inc (SNPS.O) to design its chips and outsourced the production to Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW), which uses equipment from U.S. companies.

TSMC has said it will not ship wafers to Huawei after Sept. 15.