Reuters: US considers thwarting TSMC chip deliveries to Huawei

The US government is said to consider amending rules to thwart trade between Huawei and Taiwanese chip maker TSMC. The US would do that by banning the supply of chips using American equipment.

Sources tell Reuters news agency that there is a proposal for the plan, but it is not yet certain whether it will go ahead. To make it more difficult to supply chips to Huawei, the US government would like to change the Foreign Direct Product Rule. These regulations allow the US to influence foreign manufacturers if they use US technology or software.

Under the proposal, the US would only allow chip companies such as TSMC to trade with Chinese manufacturers such as Huawei if the government has licensed it. Currently, the US already has such a condition in trade between American and Chinese companies.

The US government did not want to respond substantively to Reuters, but a spokesperson for the US Department of Commerce says that the government continues to have strong reservations about Huawei.

If there is a trade ban between TSMC and Huawei, it is likely to have major consequences for both companies. Huawei designs its own chips with its HiSilicon division, but has them manufactured at the Taiwanese TSMC. Huawei is one of TSMC’s largest customers.

In May last year, the US government placed Huawei on its Entity List, barring US companies from trading with the Chinese company. Last week, the US government gave Huawei another 45-day delay on the trade ban. That would have been done so that work at American providers can be completed. According to the ministry, the intention is for the parties involved to look for other providers in the meantime.