The two South Korean electronics companies have been forced to halt their sale of semiconductors to Shenzhen-based Huawei as the latest US restrictions come into force.
Amid the US-China trade war, US President Donald Trump has focused much of his energy on attacking Chinese technology companies such as Huawei, Tencent and ByteDance, primarily through the signing of executive orders blacklisting the companies and pressuring US allies to isolate them.
In May 2019, Trump claimed that Huawei was a national security threat which would assist the Chinese government in surveillance efforts and added it to the ‘Entity List’, effectively preventing US companies from working with the Chinese company.
This year, Trump has tightened restrictions further against Huawei, preventing it from using American technology and closing potential loopholes by barring Huawei from purchasing silicon made by any foreign manufacturers with US technology and adding dozens of Huawei affiliates to the Entity List.
Huawei has consistently denied all the allegations made against it by the US government.
Although these latest restrictions will not come into force until next week, it is already causing serious trouble for Huawei. The UK government cited these restrictions as a reason for blocking Huawei from its 5G rollout, while Huawei may be forced to stop using many high-end components (such as its latest Kirin chipsets) in its luxury smartphones as TSMC cuts off its supply in accordance with the US restrictions.
Huawei has been stockpiling as much silicon as possible ahead of sanctions coming into effect. Although it has some semiconductor manufacturing capacity, it does not yet have the capacity to manufacture high-end chips like those sourced from TSMC.
Samsung Electronics and SK Hynix will also halt their supply of semiconductors to Huawei from September 15 in accordance with the rules, despite initial confusion about whether their ability to supply components to Huawei would be affected. The most recent rules restricting foreign companies from supplying Huawei with goods which use US technology, however, make it clear that they will be forced to halt business with Huawei.
At present, it appears extremely unlikely that the Trump administration will grant the companies licenses to supply to Huawei.
While the impact on Samsung will be minor with Huawei just one among many clients (and the company now making headway into the wireless network equipment sphere), SK Hynix may be heavily affected. According to the JoongAng, a Korean news outlet, at least 40 per cent of its revenue for the first half of 2020 came from Chinese exports