Another 120 days for Huawei to buy chips from foreign companies

On May 13, U.S. President Donald Trump’s administration extended the ban on Huawei for another year, until May 2021, prohibiting U.S. companies from making transactions with Huawei. .

The ban was first issued by the US government in May last year, putting Huawei, ZTE and many other Chinese companies on the "blacklist", on charges of threatening national security.

U.S. officials said they realized that the ban issued last year was not strong enough for Huawei. Therefore, in the new decision, the US government has banned chip and semiconductor manufacturers outside mainland China (but using US software and technology) from selling products or cooperating with Huawei, except when licensed by the US government.

The ban could prevent TSMC, a Taiwanese company, from continuing to manufacture chips at Huawei’s orders. Huawei’s mobile devices are currently using chips designed by Huawei themselves, but manufactured by TSMC. Therefore, the new US government ban could make Huawei difficult in the mobile market when there is no supply of chips from TSMC.

Thus, Huawei still has a 4-month period from May 15, before the new ban takes effect to accumulate enough necessary mobile chips, as well as find a replacement supply TSMC.

TSMC is the third largest chip manufacturer in the world, providing chips for Apple, Qualcomm ... In particular, Huawei is the company’s second largest customer.

China will punish Apple, Qualcomm, Cisco ... in response 

The Global Times, citing a source close to the Chinese government, said it was ready to take a series of measures to respond to new U.S. sanctions against Huawei, including including putting US companies on the list of "untrusted entities" to conduct investigations, or imposing more restrictions on them in the Chinese market.

"China will have strong countermeasures to protect its own interests, if the US bans essential chip suppliers, including Taiwan-based TSMC, from selling chips to Huawei," the source said. of the Global Times said.

Many major US tech firms may have trouble getting punished by the Chinese government

American companies that are in the sights of the Chinese government can include Apple, Qualcomm, Cisco, Boeing ... These are all companies that are heavily dependent on the Chinese market.

According to analysts, the sanctions on big US companies will be a "blow" and cause much damage to these companies. The reason is that China is still the largest technology market in the world and if US companies cannot sell their products, they will lose a big source of revenue; Even more companies may fall into crisis.

For example, Apple, in the first quarter of 2020 alone, the Chinese market accounted for 14.8% of the company’s total revenue, although China was affected by the epidemic causing demand to decline. Besides, China is the main area producing Apple products, so if the Chinese government makes it difficult, Apple will also face many disadvantages.

Not only large companies but also small companies in the US are heavily dependent on the Chinese market. Therefore, if they are listed as "untrusted", these companies will be greatly affected.

However, Wendy Cutler, the former head of the US-China trade negotiation delegation, said that China’s application of retaliatory measures aimed at American companies could cause "backward effects" when accelerated. The process of moving American companies out of China to reduce their dependence on this country.