Huawei’s suppliers in USA could face further restrictions

Huawei’s trouble with the US doesn’t seem to be stopping anytime soon. As per the latest report from Bloomberg, US companies could soon face further restrictions supplying equipment to the Chinese smartphone giant. For the unaware, Huawei was blacklisted by the Trump administration as it was deemed to be a security threat. This prevented many US companies, including Google and ARM, from doing business with the Chinese company. As a result, Huawei was forced to release its flagship Mate 30 lineup of Android smartphones without any US-made components or Google Play Services. The restrictions also prompted Huawei to release its own HMS Core — an alternative to Google Play Services.

Even though Huawei received some temporary relief from the ban in the second half of 2019, the restriction is expected to have cost the company millions of dollars in revenue. Despite the ban, however, some US suppliers managed to work around the rules to continue sending some electronic components to Huawei. These companies cited rules that limit the US government’s ability to restrict exports when 75% of the work done in creating the items happened outside the US. The US administration is now debating increasing this threshold to 90%, which is expected to have catastrophic consequences for Huawei.

As of now, this new rule is with the Office of Management and Budget and could be approved shortly, according to people familiar with the matter. Additionally, another new regulation that governs the direct supply of products is under consideration by the Commerce Department. This rule could make its way through the process in a matter of weeks and it will apply to products that are designed in the US, but manufactured entirely overseas, said the people. Commerce Secretary Wilbur Ross clarified that the ultimate goal of these new rules isn’t to cut Huawei off from all American suppliers but to protect national security.

It’s worth noting that Huawei is one of the world’s largest purchasers of chips. If the new rules are passed, US semiconductor manufacturers will also take a massive hit. US manufacturers have argued that a complete ban on Huawei could be counterproductive as many of the parts Huawei needs can be bought from non-US providers. The industry is also worried that the ban could limit access to the Chinese market which could, in turn, slow down investments in research and development.

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Source: Bloomberg

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