TSMC cuts off chip orders from Huawei due to new US restrictions

18 May 2020

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Sources told the Nikkei Asian Review that orders already placed will not be impacted, as long as the chips are shipped before mid-September.

Today (18 May), the Nikkei Asian Review reported that Taiwan Semiconductor Manufacturing Company (TSMC) has halted new orders from Huawei as the US tightens export controls. TSMC, which is one of the world’s largest semiconductor makers, counts Huawei as one of its main customers, second only to Apple.

The US placed Huawei on an entity list in May 2019, which essentially barred US companies from doing business with the Chinese telecoms giant without government approval.

Last week, the US Department of Commerce introduced an amendment that prevents foreign manufacturers of semiconductors using American technology in their operations from shipping their products to Huawei unless they get a licence from the US.

Sources familiar with the situation told the Nikkei Asian Review that TSMC orders already in production and orders placed before the ban will not be impacted, as long as the chips are shipped before mid-September. One source said: “It’s a difficult decision for TSMC as Huawei is the company’s number two customer, but the chipmaker has to follow the US rules.”

‘Strategically target Huawei’

The new restrictions were published by the US Department of Commerce on Friday (15 May), on the same day that TSMC confirmed its plans to build a $12bn plant in Arizona. US secretary of state Mike Pompeo said that the new plant will “bolster US national security at a time when China is trying to dominate cutting-edge tech and control critical industries”.

The department said that it wanted to cut off Huawei’s “efforts to undermine US export controls”, and was amending its rules to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain US software and technology”.

US secretary of commerce Wilbur Ross said: “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 indigenisation effort.

“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.”

‘Arbitrary and pernicious’

On Sunday (17 May), China’s department of commerce said that it strongly objects to the tighter US export controls, warning that the restrictions pose a threat to the global supply chain. It added that China may take necessary countermeasures against the US.

Huawei added today that it “categorically opposes” the amendments made by the US Department of Commerce.

“In its relentless pursuit to tighten its stranglehold on our company, the US government has decided to proceed and completely ignore the concerns of many companies and industry associations,” the company said. “This decision was arbitrary and pernicious, and threatens to undermine the entire industry worldwide.”

According to Bloomberg, China’s state-backed funds invested $2.2bn into a local chip firm last week, supporting the Semiconductor Manufacturing International Corp (SMIC) wafer plant to reduce the nation’s reliance on US technology.

After the investment, the plant’s registered capital jumped from $3.5bn to $6.5bn. Bloomberg added that SMIC is planning a share sale that could raise a further $3bn.

Updated, 1.15pm, 18 May 2020: This article was updated to include a statement from Huawei.

Kelly Earley was a journalist with Silicon Republic