As China’s tech giant Huawei continues to introduce new innovations and products to its consumers, the company is not yet off-the-hook from US-China unstable relationship.
U.S. Commerce Department announced on Friday that all non-U.S. chip manufacturers using American chipmaking equipment, intellectual property, or design software would have to apply for a license before shipping chips to Huawei Technologies.
The new restrictions seems to target the Chinese company’s contract chipmaking suppliers which will would cripple the tech giant’s manufacturing of gadgets and devices in the future.
China’s Department of Commerce strongly objected to the tighter U.S. export controls on Sunday implementing such restrictions pose a massive threat to the global supply chain and Huawei hit back at the U.S. ban at the opening of its annual analysts’ summit on Monday afternoon.
The department also demanded that Washington reverse the new limits or China would take necessary countermeasures otherwise.
Consumers and international distributors need not to panic as shipments bound for Huawei that went into production before May 15 and will ship before midnight Sept. 14 are not subject to the new rule, according to the document posted online by the U.S. Commerce Department’s Bureau of Industry and Security. Only future shipments are required to have their licenses.
Harry Clark, a Washington-based trade law expert and managing director of the American law firm Orrick, said that chip contract manufacturers outside the U.S. would have to apply for a license for any shipments that do not meet the necessary criteria. Violating such laws, he added, could leave a company “exposed to substantial penalties” imposed by the regulators.
Huawei has been preparing for this move by the U.S. since the end of last year, including by stockpiling more than a year’s worth of networking equipment-related chips, especially for its crucial telecom equipment and carrier business, sources told Nikkei Asian Review.
The company has also explored a wide range of other options, including asking European chipmaker STMicroelectronics, a longtime supplier, to co-design chips, Nikkei reported earlier. However, those efforts may not immediately solve all of its vital chip supply issues, which are critical for Huawei to continue rolling out world-class technologies.
“The proposed legislation likely aims to stop Huawei’s tech progress and quash China’s 5G ambitions,” Jefferies Equity Research analysts said in a research note. “We expect China to retaliate if this materializes. The risk of a ‘super’ cold war is mounting.”