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The global electronics supply chain could be bracing for another disruption as the U.S. government moves to block semiconductor shipments from global chip 
makers to Huawei Technologies, the Chinese 5G and networking giant.
Chip makers deal directly with large global customers such as Huawei, but electronics distributors often manage the logistics of semiconductor shipments to local markets. Most global distributors have warehouse and sales operations in China and Hong Kong and will, for their authorized suppliers, handle local orders or fulfillment.
Huawei buys chips from Intel, AMD, Broadcom, Qualcomm, Texas Instruments, Micron and other U.S. companies. Global distributors Arrow Electronics Inc., Avnet Inc., Future Electronics, WPG and WT Microelectronics are distributors of those lines. Distributors’ logistics arrangements on behalf of their suppliers are not publicly disclosed.
However, boycotting a customer as large as Huawei impacts the entire supply chain. Huawei became the world’s third-largest semiconductor buyer in 2018, according to Gartner, and almost half its $100 billion revenue is derived from foreign markets.
The U.S. Department of Commerce released the following statement Friday:
The Bureau of Industry and Security (BIS) today announced plans to protect U.S. national security by restricting Huawei’s ability to use U.S. technology and software to design and manufacture its semiconductors abroad. This announcement cuts off Huawei’s efforts to undermine U.S. export controls. BIS is amending its longstanding foreign-produced direct product rule and the Entity List to narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.
Since 2019 when BIS added Huawei Technologies and 114 of its overseas-related affiliates to the Entity List, companies wishing to export U.S. items were required to obtain a license.[1] However, Huawei has continued to use U.S. software and technology to design semiconductors, undermining the national security and foreign policy purposes of the Entity List by commissioning their production in overseas foundries using U.S. equipment.
“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,” said Secretary of Commerce Wilbur Ross. “This is not how a responsible global corporate citizen behaves. We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”
Specifically, this targeted rule change will make the following foreign-produced items subject to the Export Administration Regulations (EAR):
(i) Items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and
(ii) Items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List (e.g., HiSilicon), that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States. Such foreign-produced items will only require a license when there is knowledge that they are destined for reexport, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.
To prevent immediate adverse economic impacts on foreign foundries utilizing U.S. semiconductor manufacturing equipment that have initiated any production step for items based on Huawei design specifications as of [date of rule effective date], such foreign-produced items are not subject to these new licensing requirements so long as they are reexported, exported from abroad, or transferred (in-country) by 120 days from the effective date.
Reuters reports the measures also includes launching investigations and imposing restrictions on U.S. companies such as Apple Inc., Cisco Systems Inc. and Qualcomm Inc.
U.S. chip stocks, including NeoPhotonics, Micron, Lam Research, AMD, Intel and Qualcomm, opened in the red on Friday.
