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May 18, 2020

Silicon “Cold War” Heats Up as US Turns the Screw on China

"We must... prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”"

By CBR Staff Writer

Taiwan’s TSMC, the world’s largest contract chipmaker, has halted new orders from Huawei Technologies — its second-largest customer after Apple — in response to explosive new US government restrictions. That’s according to multiple sources speaking to the Nikkei Asian Review.

The move follows the US Department of Commerce’s move Friday to impose stringent new export controls targeting China’s Huawei; a decision designed to “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology”.

While China has been pushing hard to improve the capabilities of its domestic chip foundries, it still relies heavily on TSMC nodes for cutting edge computer chips. Huawei said there would be a “terrible price” to pay across the global technology sector as a result of the move. (Banner image shows Huawei’s rotating chairman Guo Ping).

(Other Chinese tech firms like Alibaba are turning to royalty-free RISC-V architectures and domestic foundries in a bid to boost independence).

See also: Alibaba Reveals New RISC-V Semiconductor, as China Moves to Wean Itself off Western Chips

The department’s Bureau of Industry and Security (BIS) says Huawei has been using foundries (third-party chip factories) like TSMC to bypass export controls imposed in May 2019 against Huawei and 114 of its affiliates.

The agency notes: “Huawei has continued to use U.S. software and technology to design semiconductors, undermining the national security and foreign policy purposes of the Entity List by commissioning their production in overseas foundries using U.S. equipment.”

As Secretary of Commerce Wilbur Ross put it on Friday: “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 indigenization effort.

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“However, that effort is still dependent on U.S. technologies.

“This is not how a responsible global corporate citizen behaves.  We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”

Huawei reacted with frustration, saying “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”, adding that the  decision was “arbitrary and pernicious, and threatens to undermine the entire industry worldwide.”

The company said in an official statement: “This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries. We expect that our business will inevitably be affected. We will try all we can to seek a solution.”

Last week TSMC agreed to build a $12 billion fab in Arizona, amid sustained pressure from US policy makers to localise chip making amid national security and supply chain fears about Chinese production.

See also: TSMC’s $12 Billion US Chip Plant will “Bolster US National Security”

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