U.S. Cuts Chip Exports to Huawei, Aims to Limit Tech Rise

Key Takeaway

• U.S. revokes some Huawei chip export licenses, intensifying efforts to curb China's tech expansion.
• Despite sanctions, Huawei's Mate 60 Pro showcases advanced chips and 5G, challenging U.S. restrictions.
• Qualcomm anticipates revenue impact from Huawei's shift to in-house chip development and competitive pressure in China.

US Tightens Grip on Huawei

The Biden administration has taken a decisive step in its ongoing efforts to curb China's technological advancements by revoking certain licenses for chip exports to Huawei Technologies Co., a major Chinese tech giant. This move directly impacts the ability of US firms, notably Qualcomm Inc. and Intel Corp., to supply semiconductors to Huawei for use in its phones and laptops. The Commerce Department, emphasizing the need to protect national security and foreign policy interests, has confirmed these revocations amidst a backdrop of increasing tensions between the US and China over technological supremacy and cybersecurity concerns.

Impact on Huawei and US Chipmakers

Huawei, which was placed on a US trade blacklist in 2019, faces renewed challenges due to these restrictions. Despite these hurdles, Huawei has shown resilience, notably with the launch of its Mate 60 Pro smartphone, which features an advanced chip made by China's top chipmaker, SMIC, and offers 5G connectivity. This development has raised eyebrows in Washington, given the US's efforts to block Huawei's access to such technology. On the other side, US chipmakers like Qualcomm and Intel, which have been supplying Huawei under specific licenses, anticipate a significant impact on their operations and revenues. Qualcomm, in particular, has expressed concerns over the potential loss of revenue from Huawei and the competitive pressures if Huawei's in-house chip development efforts succeed.

Legislative and Industry Reactions

The decision to revoke the licenses has garnered support from key lawmakers, who view it as essential to preventing China from acquiring advanced technologies, especially in areas like artificial intelligence. House Foreign Affairs Committee Chairman Michael McCaul highlighted the importance of this move in blocking chip sales to Huawei. The tech industry, particularly companies directly affected like Qualcomm and Intel, has responded cautiously, with Qualcomm acknowledging the limited and diminishing scope of its business with Huawei. Analysts suggest that while the immediate financial impact on these US companies may be minimal, the broader implications for US-China tech competition and global semiconductor supply chains are significant.

Management Quotes

• Commerce spokesperson:

  "We continuously assess how our controls can best protect our national security and foreign policy interests, taking into consideration a constantly changing threat environment and technological landscape... As part of this process, as we have done in the past, we sometimes revoke export licenses. But we can confirm that we have revoked certain licenses for exports to Huawei."

• Qualcomm (in an SEC filing):

  "While we have continued to sell integrated circuit products to Huawei under our licenses, we do not expect to receive product revenues from Huawei beyond the current calendar year... Additionally, to the extent that Huawei’s 5G devices take share from Chinese original equipment manufacturers that utilize our 5G products or from non-Chinese OEMs that utilize our 5G products in devices they sell into China, our revenues, results of operations and cash flows could be further impacted."