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US moves to cut off Huawei from overseas chip manufacturers

The Commerce Department cited security concerns that Huawei has denied

The US Commerce Department has taken another step toward cutting off Chinese telco Huawei from the overseas companies that make its semiconductors. An amended export rule would block shipments of semiconductors to Huawei to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain US software and technology,” the agency announced on Friday.

The rule prevents foreign manufacturers of semiconductors who use American software and technology in their operations from shipping their products to Huawei unless they get a license from the US. That license requirement could allow the Commerce Department to block the sale of semiconductors made by Taiwan Semiconductor Manufacturing Co. (TSMC) for Huawei’s HiSilicon unit, according to The Wall Street Journal.

The rule will allow chips in production to be shipped to Huawei, provided the shipment is completed within 120 days from today.

The Trump administration placed Huawei and 114 of its affiliates on its Entity List in May 2019, which meant US firms were unable to sell technology to the company without government approval. The US also has accused Huawei of building backdoors into network infrastructure, ostensibly to aid Chinese government spying efforts. Huawei has repeatedly denied the Trump administration’s accusations of spying.

“Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort,” Secretary of Commerce Wilbur Ross said in a statement on Friday. “We must amend our rules exploited by Huawei and HiSilicon and prevent US technologies from enabling malign activities contrary to US national security and foreign policy interests.”

Google suspended Huawei’s Android license last May to comply with the US restrictions. But the UK decided it would continue to allow Huawei to supply equipment for its 5G infrastructure, much of which was already under construction when the US announced its restrictions.

Despite the limitations in the US, Huawei kept its No. 2 spot among smartphone makers for 2019, with sales for the year second only to Samsung. And TSMC just announced plans to build a new chip manufacturing plant in Arizona.

Also Friday, the Commerce Department extended a temporary license that will allow US companies that are operating wireless networks in rural parts of the US to continue doing business with Huawei through August 13th. This license was due to expire on Friday, and the Commerce Department said there would be no further extensions.

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