US escalates China tensions with tighter Huawei controls

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The Trump administration has tightened export controls targeting Huawei and its suppliers in the global semiconductor industry, adding to the tensions between Washington and Beijing that have flared during the pandemic.

In a statement on Friday, the commerce department said that Huawei, the Chinese telecommunications equipment company deemed a risk to US national security, and HiSilicon, an affiliate, had continued to use American technology in its semiconductor design despite being subject to export controls since May of 2019.

It charged that Huawei was “commissioning their production in overseas foundries using US equipment”, undermining US national security and foreign policy goals.

“This is not how a responsible global corporate citizen behaves,” said Wilbur Ross, the US commerce secretary.
The US commerce secretary, Wilbur Ross, described the activities of the telecoms equipment maker as ‘malign’ and contrary to US national security © Bloomberg

“We must amend our rules exploited by Huawei and HiSilicon and prevent US technologies from enabling malign activities contrary to US national security and foreign policy interests,” Mr Ross said.

The commerce department said the restrictions would affect semiconductor designs and chipsets, including those produced in foreign plants using “US equipment”.

The move drew strong approval from a Republican party China hawk, Ben Sasse, the Senator for Nebraska. “The United States needs to strangle Huawei. Modern wars are fought with semiconductors, and we were letting Huawei use our American designs,” he said. “This is pretty simple: chip companies that depend on American technology can’t jump into bed with the Chinese Communist party. This rule is long overdue.”

Boosting US production of semiconductors and preventing chip technology from being accessed and used by Chinese companies and the government has become a big priority for the Trump administration in its rivalry with Beijing.

On Thursday, it backed a move by Taiwan Semiconductor Manufacturing, the world’s biggest contract chipmaker, to build a $12bn factory in the US state of Arizona.

TSMC said the fabrication plant, or fab, would create more than 1,600 jobs and produce 20,000 wafers, a thin slice of silicon that is used to make products such as integrated circuits, per month. The Trump administration had become increasingly concerned about TSMC’s role as a big chip supplier to Huawei, which it aims to choke off with the new export controls.

As US-China tensions expanded during the fallout from the coronavirus pandemic, the commerce department in April had already moved to ratchet up export controls in the chip industry by tightening restrictions on sales of technology to civilian companies that might be used to support the military.

But the latest step directly targeting Huawei and its US suppliers marks a further escalation.

While the US had previously slapped the Chinese company on its so-called “entity list” in May of 2019 — during a breakdown in trade relations between Washington and Beijing — the commerce department allowed some leeway for sales to continue by issuing waivers to US suppliers for certain transactions with Huawei.

The flexibility was met with relief among US chipmakers and corporate America generally, but was criticised by China hawks in Washington who considered it for being excessively lenient.

The action by the Trump administration comes as the US president and officials have adopted a more confrontational stance towards China, blaming Beijing for concealing information about the spread of coronavirus around the world.

Donald Trump this week threatened to “cut off the whole relationship” with China in the midst of the pandemic, including a possible move to unravel the trade truce painstakingly reached in January of this year.

The Trump administration has already moved to stop a federal pension fund from investing in certain Chinese stocks, and the new tightening of export controls related to Huawei is the latest evidence of geopolitical tensions spilling over into the economic realm.

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