Acquisition

U.S. imposes new restrictions on Huawei, semiconductor industry

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The Department of Commerce is adding dozens of internationally-based Huawei affiliates to its entity list that severely restricts the ability to do business with U.S. firms while expanding the reach of other controls to include companies who buy or manufacture U.S.-designed software or computer chips on Huawei's behalf.

In May, Commerce issued new rules subjecting companies to enhanced licensing requirements if they sold third-party computer chips or chip designs to Huawei that rely U.S. software or manufacturing equipment. That rule originally applied only to products designed to help Huawei build their own indigenous chips, but the changes today apply those same restrictions to all foreign produced semiconductors made with U.S. technology or equipment.

A Commerce official told reporters the expanded rules were designed to give the U.S. "greater visibility into companies that seek to work with Huawei" and counter what they claimed were observed instances where the company has attempted to evade the original restrictions, though they declined to provide evidence or examples of such actions when pressed by reporters.

"The idea behind imposing this broader control is to ensure that all companies, no matter where they are in the world, if they're working on behalf of Huawei, are all under the same licensing regime and subject to the same scrutiny," the official said on background at a press briefing.

The department has also broadened a number of controls more generally to require special licenses when any entity on the list -- Huawei or otherwise -- acts as a purchaser, intermediate consignee, ultimate consignee or end user to a covered transaction. Another regulation, the Foreign Direct Product rule, was amended to impose new controls on all 1,400 organizations on the entity list when it comes to purchasing foreign-produced chips or chip design that use U.S. equipment or software.

"We've been very clear that we expect industry to know their customers…we expect companies to know, frankly, who is in their supply chain and where their items are going," the official said.

The regulations are scheduled to released in the Federal Register on Aug. 17.

Last year, the department essentially banned U.S. companies from selling parts and components to 68 Huawei affiliates, though it put in temporary waivers that allowed limited transactions to ease the transition for U.S. suppliers and permit patching updates to Huawei systems and products. Those waivers expired this month, and the latest order subjects an additional 38 Huawei affiliates around the world to similar restrictions. Commerce officials have made permanent an exemption that allows companies to legally exchange information on cybersecurity vulnerabilities in Huawei products.

A number of U.S. lawmakers praised the moves, saying the company is a U.S. national security threat. In a statement, Sen. Ben Sasse (R-Neb.) said the new restrictions were "the right move" and accused the company of working at the behest of the Chinese government. Huawei has disputed such allegations.

"Huawei isn't a private company, it is the Chinese Communist Party's tech puppet," Sasse said. "We cannot allow Beijing to use American technology to weaponize networks against the free world."

A request for comment to Huawei was not immediately returned.

About the Author

Derek B. Johnson is a former senior staff writer at FCW.

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