Having extended the trade sanctions on Huawei until May 2021, the US government on Friday imposed further restrictions on the company as part of its continuing efforts to isolate the Chinese telecom giant from global trade.

According to the country’s Commerce Secretary, Wilbur Ross, the move will prevent Huawei from using American technology to design and manufacture semiconductors (chipsets) by circumventing existing trade sanctions. In a recent interview with Fox Business, Ross said: “There has been a very highly technical loophole through which Huawei has been able to, in effect, use U.S. technology. We never intended that loophole to be there”. These new regulations, he said, are “a highly tailored thing” intended to plug that loophole.

Under the new rules, foreign chip makers that do business with Huawei’s HiSilicon chip-making unit must obtain a license from U.S. officials in order to manufacture Huawei-designed semiconductors using US technology. The rule is effective with immediate effect, but the Commerce Department granted foreign foundries, like Taiwan Semiconductor Manufacturing Company (TSMC), a major producer of Huawei’s chips, a 120-day grace period to comply with the new regulation.

Reacting to the latest developments, China urged the US to put an end to the escalating trade war between the two countries. Calling the latest round of restrictions “unreasonable suppression of Huawei and Chinese enterprises”, the country’s Ministry of Foreign Affairs issued a statement Saturday, saying: “The Chinese government will firmly uphold Chinese firms’ legitimate and legal rights and interests. We urge the US side to immediately stop its unreasonable suppression of Huawei and Chinese enterprises”.

While China hasn’t officially threatened retaliation, a Global Times editorial on Friday claimed that if provoked further, “China will carry out countermeasures, such as including certain US companies into its list of ‘unreliable entities,’ imposing restrictions on or investigating US companies such as Qualcomm, Cisco and Apple, and suspending purchases of Boeing aircraft”. It will be interesting to see if the trade war between the two largest economies in the world will escalate that much or if cooler heads will prevail going forward.

Update 1 (18/05/2020 12:43 pm)

TSMC, one of the biggest foundries that manufactured chips for Huawei, has now stopped taking orders from the Chinese company.

The foundry was given a 120 day grace period by the US Department of Commerce to comply with new US regulations.

Huawei is heavily dependent on TSMC for manufacturing chips used in its smartphones. TSMC also manufactures Huawei’s AI processors and networking chips.

China has since warned the US of ‘all necessary measures’ if the country doesn’t reverse its latest regulations.

It is noteworthy that TSMC will have to supply orders already placed by Huawei within the next 120 days.