USA forced TSMC to stop supplying chips to Huawei

Taiwan Semiconductor Manufacturing Co.(TSMC), the world’s largest contract chip maker, have suspended accepting new orders from Huawei Technologies in response to the tightening of export controls by the U.S., aimed at further limiting the access of Chinese companies to the world’s major supply of chips, said multiple sources at the Nikkei Asian Review.

the Sources familiar with the situation, reported that TSMC stopped taking new orders from Huawei, but the agreement made before the ban can be executed if the chips will ship until mid-September. We will remind, on Friday, the Commerce Department stated that the amendments to the export regulations, which are aimed at restricting the supply of Chinese Huawei “semiconductor products, the design of which was used some American technology and software.”

Thus, all non-U.S. chip manufacturers are using for making chips, American equipment, intellectual property or software design, will have to apply for a license before sending the chips to Huawei.

the sources noted that TSMC is a difficult decision, as Huawei is the second largest customer of the company, but the vendor needs to follow the rules of the United States.

Huawei, the world’s largest manufacturer of telecommunication equipment and the second largest manufacturer of smartphones, relies heavily on TSMC in the manufacture of its advanced chips — including mobile processors used in flagship smartphones Huawei. The Taiwanese company, which also produces artificial intelligence processors, and network chips for Huawei, is seen as a vital production partner of the Chinese company, which is trying to resist pressure from the United States.

this relationship with Huawei, however, POStwili Taiwanese company in the crossfire of tensions between Washington and Beijing.

More stringent export regulations in the USA were announced on the same day, when TSMC announced plans to build a plant worth $ 12 billion in Arizona — a move that, according to Secretary of state Mike Pompeo, “will strengthen U.S. national security at a time when China is trying to dominate in advanced technologies and control critical industries”.

on Sunday, the Ministry of Commerce of China said it strongly opposed the tightening of U.S. export controls and stated that such restrictions pose a major threat to global supply chains. The Ministry has demanded that Washington repeal of new restrictions and warned that otherwise China will take the necessary countermeasures.

In response to the request for review TSMC said that “did not disclose details of customers ‘orders”, adding that “TSMC has always complied with the laws and applicable regulations”. The company announced that it is working on assessing the impact of the new export controls. Shares of TSMC on the Taiwan stock exchange fell more than 2% during morning trading on Monday.

Meanwhile, Huawei said that it will release a statement regarding the ban on United States exports, on the opening of the annual summit of analysts on Monday afternoon.

the New restrictions specifically designed for component suppliers Huawei. These include TSMC, Semiconductor Manufacturing International Co., a leading Chinese contract manufacturer of chips, as well as Win Semiconductors, a manufacturer of radio chips. Support Win Semiconductors is crucial for Huawei to reduce its dependence on American suppliers Skyworks and Qorvo, experts say.

Huawei is the second largest customer of TSMC, second only to Apple, the share of orders, which accounts for 15-20% of the annual income of the Taiwanese vendor. At thonkam Bernstein Research, Huawei is also up to 20% of the revenue of Semiconductor Manufacturing International Corporation.

Huawei was preparing for this move by the United States since the end of last year, stockpiling chips and network equipment in the year ahead, this is especially critical for telecommunications equipment, sources told the Nikkei Asian Review.

the Company has also explored several other options, including those addressed to the European chip maker STMicroelectronics for the joint design of chips, reported Nikkei. However, these efforts may not immediately solve all the vital for the company Huawei supplies the chips that are crucial to the continuing deployment of world-class technologies, analysts say.

“the Proposed bill is likely intended to stop technological progress Huawei and to question the ambitions of China in the field of 5G. We expect that the response of China will not be forthcoming. The risk of a “super” cold war grows.””, says a research note from Jefferies Equity Research.