Huawei stockpiling chips, expecting tighter US sanctions

January 23, 2020 //By Peter Clarke
Huawei stockpiling chips, expecting tighter US sanctions
China's Huawei is asking vendors to send up to a year's supply of components for its telecommunications infrastructure business because it expects the United States to ramp restrictions on its business, according to Nikkei Asian Review.

Although the US and China signed a "phase-one" trade agreement recently the two countries are still battling each other as the US appears determined to prevent the rise of China's technological and economic capability (see US lobbied hard to deny China EUV lithography). The US has domestic bans on the purchase of Huawei infrastructure equipment and on the sale of components to Huawei (see TSMC says not fazed by lowering of 'dual-use' threshold). It is trying to persuade other states to follow its line.

Enhanced sanctions against Huawei could come as soon as next month, Nikkei reported unnamed sources saying. Huawei is scrambling to get as much inventory in stock as possible and is prioritizing inventory for 4G and 5G routers, switches and basestations, rather than components for its smartphones business.

Although smartphones represent about half of Huawei's business it is the infrastructure equipment that the US has a particular problem with. It claims that the Chinese state could hack Huawei networks and compromise the security of countries that depend on those networks. This is something Huawei has always denied. Huawei has a procurement budget of $70 billion.

Under Wassenaar export control rules companies outside the US need to get a so called "dual-use" export licence if their products could have military application and have 25 percent or more US content. This rule could be about to be tightened to 10 percent or even 0 percent, the Nikkei article states. Foundry chip supplier TSMC does a great deal of trade with Huawei and China represented 20 percent of TSMC's total revenue in 2019.

A change in the ruling could effectively isolate Huawei, but could also have political implications for the tension between China and Taiwan. China regards Taiwan as a rogue state that it will take back under control at some point. Taiwan's independence is underwritten by the United States.

Related links and articles:

Nikkei Asian Review article

News articles:

US lobbied hard to deny China EUV lithography

TSMC says not fazed by lowering of 'dual-use' threshold


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