The trade war between the United States and China is set to escalate as the Trump administration tightens restrictions on the supply of US technology and software to smartphone company Huawei.
The U.S. government issued a new order on Friday barring Huawei and its suppliers from using U.S. technology and software, a move likely to escalate tensions between Washington and Beijing.
The new rule, or ban, will be effective in September, barring companies using US-made machinery and software around the world from designing or manufacturing chips for Huawei or its subsidiaries.
Companies can apply for a license to sell their products to Huawei, but it is more likely that these applications will be rejected.
Earlier, the United States extended the sanctions order on Huawei until May 2021, justifying the Trump administration’s threats to national security.
The United States has accused Huawei of having close ties to the Chinese government and may use its spying equipment, after which Huawei was blacklisted in the United States following an executive order from President Donald Trump.
But so far the full ban has not been implemented, but a temporary license is issued every three months, allowing some US companies to work with Huawei.
John Neuffer, president of the Semiconductor Industry Association, which represents chip companies, said his group had concerns that the new ban would affect the global semiconductor supply chain and create uncertainty.
But the new US move seems to be aimed at further damaging Huawei, which still relies heavily on US-made machinery and software designs to make chips for smartphones and tablets.
Since the US impose sanctions last year, Huawei has reduced its reliance on US chip companies such as Qualcomm and increased production at its chip unit High Silicon.
But the unit still has to rely on other companies, including Shanghai-based semiconductor maker SMIC and Taiwan’s TSMC.
Most of these companies have to rely on the United States to some extent for their technology and this is what the US government has targeted.
A statement from the US Department of Commerce said “Huawei had tried to “undermine” its previous restrictions by using American software and technology to make its own semiconductors, and buying products from foreign foundries that used American equipment.”
US Commerce Secretary Wilbur Ross also said in an interview: “There has been a very highly technical loophole through which Huawei has been able, in effect, to use U.S. technology with foreign fab producers.”
The move comes as tensions between the United States and China continue to rise.
The US president has accused China of failing to take appropriate action to prevent the spread of the coronavirus, and has indicated that the US will take action against the Chinese government.
He also threatened to cancel a trade agreement reached between the two countries in January.
“The virus came from China, it should have been stopped in China before it spread around the world,” Donald Trump said at an event on Friday.
Following the new sanctions on Huawei, China is expected to take action against US technology companies that rely on sales in China, most notably Qualcomm and Apple.
The Chinese government-run newspaper Global Times quoted sources as saying that the Chinese government was ready to respond to the new ban on Huawei.
On May 15, Ho Chi Minh, editor-in-chief of the Global Times, said in a tweet: “Based on what I know, if the US further blocks key technology supply to Huawei, China will activate the “unreliable entity list”, restrict or investigate US companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes.”
I am asked a lot recently: Will a war break out between China and the US? My answer: The two countries increasingly dislike each other, various conflicts are rising, therefore, risk for a military clash is increasing. But meanwhile, they both don't want a war. Am I right?
— Hu Xijin 胡锡进 (@HuXijin_GT) May 14, 2020