The Department of Commerce (DoC) has amended an existing rule in order to prevent China-based network equipment maker Huawei from using U.S. technologies to design and manufacture semiconductors.
The action is in line with numerous steps the U.S. government has taken in recent years to restrict Huawei’s participation in the U.S. supply chain for equipment, particularly regarding 5G wireless networks. The U.S. government considers the company a security risk due to its connection with the Chinese government.
The DoC’s Bureau of Industry and Security (BIS) announced on May 15 amendments to the foreign-produced direct product rule and the Entity List, which includes firms subject to licensing requirements under the Export Administration Regulations. The BIS had added Huawei Technologies and over 100 overseas affiliates to the Entity List last year, but the company was able to work around those restrictions, according to the Secretaries of Commerce and State.
The May 15 BIS action amends General Prohibition Three, also known as the foreign-produced direct product rule, by exercising existing authority under the Export Control Reform Act of 2018 (ECRA), to impose a new control over certain foreign-produced items, when there is knowledge that such items are destined to a designated entity on the Entity List.
“Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort. However, that effort is still dependent on U.S. technologies,” Secretary of Commerce Wilbur Ross said.
“Today’s expanded rule helps prevent Huawei from undermining U.S. export controls, closing a loophole that has allowed the company to exploit U.S. technology and threaten our national security,” Secretary of State Mike Pompeo said. “It also imposes U.S. export control restrictions on countries that use U.S. technology or software to design and produce semiconductors for Huawei. Companies wishing to sell certain items to Huawei produced with U.S. technology must now obtain a license from the United States.”
The rule change came one day after the announcement that the Taiwan Semiconductor Manufacturing Company (TSMC) would be building a $12 billion semiconductor facility in Arizona.
“The semiconductor industry is critical to U.S. economic growth, underpinning many of the advanced technologies that consumers depend on including smart phones, transportation safety applications, advanced medical devices, and telecommunications,” the DoC’s release said. “TSMC’s investment will reinforce American leadership in cutting-edge semiconductor design and manufacturing.”