Huawei is denied the production of chips

For some time now, the climate between the USA and China has been becoming increasingly harsh. This is particularly evident in terms of economic policy. The dispute with the Chinese company Huawei is a clear example of this. Now the dispute is again having serious consequences for the large tech company. For example, US conditions may possibly cause chip manufacturer TSMC to stop its cooperation with Huawei.

There is a threat of a production stop

As has become known in the last few days, the Taiwanese company TSMC plans to stop chip production for Huawei in the next two months. The reason for this is the strict economic policy conditions coming from the USA. If TSMC wants to adhere to these, there is simply no alternative to stopping production.

Orders are no longer accepted

The chip manufacturer itself is probably afraid of far-reaching consequences from US economic policy. According to CEO Mark Liu, TSMC has not accepted any orders from Huawei since mid-May. After all, they want to comply with the conditions imposed by the USA.

Contents of the US conditions

A close look at the conditions imposed by the USA makes it clear why TSMC has terminated a cooperation. The conditions stipulate that certain suppliers of Huawei must apply for a license. This affects manufacturers who use certain parts or tools manufactured in the USA in their production. In this way, the chip manufacturer simply wants to avoid the additional expense that would be associated with more appropriate licenses.

Not a “real” alternative

Of course, Huawei reacted to the US requirements early enough. So the company looked for a chip manufacturer from China, which is not bound by the regulations. With SMIC, the smartphone giant from the Far East has already found an alternative. However, it is more than questionable whether SMIC can really replace the previous manufacturer. The Chinese chip manufacturer is probably unable to produce the particularly important Kirin 990 tailor-made for Huawei’s smartphones.

It could be dangerous, especially for the important Kirin 990 from Huawei.

Setting feature of TSMC

The majority of Huawei’s smartphones rely on chips manufactured using the 7 nm process. This refers in particular to the powerful Kirin 990, so it will be really exciting to see whether the Chinese major corporation can find a suitable replacement in time. In any case, SMIC is not yet a suitable alternative. After all, the Chinese manufacturer produces its chips using the 14 nm process.

No economic consequences for TSMC

Naturally, the chip manufacturer is losing one of its largest customers in Huawei. But if you take a look at the economic outlook, the loss does not seem to have any serious consequences. For example, TSMC expects sales of USD 11.2 to 11.5 billion in the coming quarter. This represents an increase in revenue of more than 20 percent when compared to the previous year. This is not by chance. Due to its unique 7 nm process, the chip manufacturer has an important unique selling point. TSMC also has other well-known customers such as Apple or AMD.
*** Translated with (free version) ***

Simon Lüthje

I am co-founder of this blog and am very interested in everything that has to do with technology, but I also like to play games. I was born in Hamburg, but now I live in Bad Segeberg.

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