TSMC, which is the leading contract manufacturer for chipsets, has now stopped new orders from Chinese giant Huawei Technologies. The move comes after the United States tightened export controls, a move aimed at limiting Huawei’s access to chip supplies.
According to a person aware of the development, while TSMC has stopped taking new order from Huawei, the company will continue producing the chipsets that are already in production and for the orders that were taken before the new rule change and the shipments for the same should continue till Q3 2020.
Last week, The U.S. Commerce Department announced that the all the chip manufacturers using American chipmaking equipment, intellectual property or design software needs to apply for a license before shipping chips to Huawei. This is similar requirement that U.S. added when it put Huawei on the Entity List, effectively banning the company.
This is a major blow to Huawei, which is the world’s leading telecom maker and the second largest smartphone brand. The company heavily relies on TSMC for manufacturing its chipsets used in almost all of its smartphones, including the flagship premium devices. The Taiwanese company also produces its AI processor and networking chips.
In response to this, China’s Department of Commerce said that it strongly objects to the tighter U.S. export controls and added that such restrictions pose a huge threat to the global supply chain. It demanded U.S. to reverse the new restrictions and warned to take necessary countermeasures.
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The new rule change is also a blow for TSMC in terms of revenue given that Huawei is the company’s second-largest client after Apple and accounts for around 15-20 percent on its annual revenue. Also, the announcement about the tighter restrictions came the same dat TSMC announced its plan to invest $12 billion for a new plan in Arizona.
But it seems that Huawei was anticipating such move by the United States. The company has reportedly been stockpiling more than a year’s worth of networking equipment-related chips which are crucial for its telecom equipment and carrier business.
Further, the company is also reportedly exploring other options and has asked European chipmaker STMicroelectronics to co-design chips. Huawei had recently announced shifting of its 14nm chipset orders from TSMC to SMIC and the Chinese manufacturer has also started mass-production of Kirin 710A.
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