Chinese technology giant Huawei is likely to stockpile more semiconductor chips during the 120-day grace period following the US government's intensified restrictions to cut off supplies, industry insiders said.
They added that global chip makers, including the Taiwan Semiconductor Manufacturing Co (TSMC), will likely skew their production ability toward supplying Huawei during the grace period .
Taiwan media reported on Monday that TSMC, the world's biggest contract chipmaker and also a key Huawei supplier, received a large chip order worth $700 million from Huawei, in which TSMC will produce high-end 5nm and 7nm chips.
A senior industry analyst familiar with the chip supply chain confirmed the news to the Global Times, noting that the Huawei order was made last week, "right before the US government tightened the ban."
"Time is short and it's really a matter of speed now," said the insider.
On Friday, the US Department of Commerce said it was amending an export rule and its Entity List to "strategically target Huawei's acquisition of semiconductors that are the direct product of certain US software and technology," according to a statement on its website. The rule will come into effect on Friday but with a 120-day grace period.
In response to the ban, Huawei said in a statement on Monday that "it categorically opposes the amendments made by the US Department of Commerce to its foreign direct product rule that target Huawei specifically," adding that the US decision was "arbitrary and pernicious," and threatens to undermine the entire industry worldwide.
"Huawei could have anticipated that the US was going to intensify its chip ban, as Friday marks one year since the Chinese firm was placed on the US Entity List - that's also why it has made its orders right before the deadline," Ma Jihua, an industry veteran analyst, told the Global Times on Monday.
Ma said TSMC may also rush orders with more resources tilted toward supplying Huawei, as losing a big customer like Huawei would be "destructive" for the Taiwan-based chipmaker. "However, the orders may only support its chip supply for half a year, as technology evolution in the sector runs fast," Ma said.
Huawei could still rely on Shanghai-based Semiconductor Manufacturing International Corp (SMIC) for up to 60 per cent of its chip supplies, Han Xiaomin, general manager of Jiwei Consulting in Beijing, told the Global Times.
But if the US besieges Huawei, which might involve escalating restrictions on high-end fundamental technologies from the US, China's domestic semiconductor sector and its electronic information industry at large would come under pressure, Han said.
It would take five to 10 years for domestic chipmakers to equal the current prowess of US technologies if no progress was made on the US side over the duration, Han said, suggesting that hitting back at the likes of Qualcomm and Apple, a move being considered by the Chinese government first reported by the Global Times, might prompt the affected companies to lobby against the restrictions.
In the worst-case scenario, if the US continues its ban and Huawei uses up its chip stock without any domestic substitutes, the company may cut or even sell its high-end consumer devices businesses, and return to its core telecommunications equipment manufacturing, Ma said, adding that the firm will not be defeated given its enormous strength in 5G, though 6G research and development (R&D) may be dragged.
Huawei's R&D rhythm, particularly for its future release of high-end consumer devices, will be affected. It needs to be flexible in its business layout and strategy, and make a strategy change according to the changing situation, industry analysts said.
The US' move has disrupted the global chip industry chain. Amid an industry reshuffle, some firms will die. Many US firms such as Qualcomm will feel the blow, said Ma.
On Friday, TSMC was also reported to have halted new orders from Huawei in response to tighter US export controls aimed at further limiting the Chinese company's access to crucial chip supplies, according to a report from Nikkei Asian Review, citing multiple sources.
TSMC said it does not disclose order details, adding that the Nikkei report was "purely market rumour," according to a Reuters report.
TSMC had not responded to an interview request from the Global Times as of press time.
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