The latest US government action against China’s Huawei takes a direct aim at the company’s HiSilicon chip division – a business that has become central to China’s ambitions in semiconductor technology in just a few years, but will now lose access to devices that Are central to its success.

It may be the most damaging US attack yet against a Chinese company, which US officials told reporters Wednesday to act as a “tool of strategic influence” for the Chinese Communist Party. Huawei The technologies, for its part, condemned the US allegations and called the new measures “arbitrary and dangerous”.

Established in 2004, HiSilicon Mostly develops chips for Huawei, and has been at the forefront of a global chip business dominated by US, Korean and Japanese companies for most of its existence. Like most electronics firms, Huawei relied on others for chips running their devices.

But heavy investment in research and development helped Hycelicon make rapid progress, and in recent years the 7,000-employee unit has been central to Huawei’s growth as a major player in the global smartphone business and emerging 5G Telecom Networking Business.

Of HiSilicon Kirin Smartphone processors are now considered equal to what they are made Apple And Qualcomm – Rare example of an advanced Chinese semiconductor product that competes globally.

Huawei in 5G is also central to Huawei’s leadership, when the US terminated access to some US chips last year.

In March, Huawei revealed that 8 percent of the 50,000 5G base stations sold in 2019 came with no US technology, instead using HiSilicon chipsets.

But the US export control rules, Reported Last week, HiSilicon aimed to block access to two key tools: Cadence Design Systems and chip design software from US firms, including Synopsys, and manufacturing skills led by “Foundries,”. Taiwan Semiconductor Manufacturing Co (TSMC), That manufacture chips for many of the world’s top semiconductor firms.

With the new restrictions “HiSilicon” will be in a position where they are no longer able to manufacture chips, or if they do, they are no longer gaining an edge, “says Stewart Randall, who lives in Shanghai in China Monitors the chip industry. -Bed Consultancy Intralink.

Analysts said that without its own processor, Huawei would lose its edge over domestic smartphone rivals. International sales were already hurt by the ban on key usage Google Software.

Industry sources say that Huawei has stocked the chips, and the new US rule will not be fully implemented for 120 days. US officials also note that licenses may be granted for certain technologies. HiSilicon can also use design software that it has already acquired.

HISilicon on the hard spot
Nevertheless, analysts believe that HiSilicon is in a difficult position. Nearly all chip factories – including China’s major foundry, Semiconductor Manufacturing International – buy gear from similar equipment manufacturers, led by the U.S. The firms do Applied Materials, Lam Research and KLA.

The new US rule requires licenses for companies using American machinery to make chips designed by Huawei and delivered to a Chinese firm. To ensure that the new rule does not hold items shipped to a third party, this will allow high-value fabricators such as HySilicon’s fabricators such as TSMC to ship the chips to equipment manufacturers who can ship them directly to the customer.

While there are alternatives to American machines – Japan’s Tokyo Electron, for example, makes gears that compete with applied materials – replacing technology in America is not as simple as swapping a machine.

VLSI Research Chief Executive Dan Hutchison said, “You almost have to think of it as a heart transplant. Given that chip production lines are finely calibrated systems where everything has to work well together.”

Doug Fuller of the Chinese University of Hong Kong said that Huawei had few options. It could slip around the rule by sending ships directly to Huawei customers, though US officials said they would be cautious about such workarounds.

Huawei and the Chinese government may make repeated efforts to build production capabilities that did not require American equipment, by investing in nascent Chinese rivals and purchasing from Japanese and Korean companies, even if that was a quality sacrifice.

Or Huawei could turn away from HiSilicon and return to buy from foreign suppliers – not just Americans. “Huawei is still talking about Samsung Processor, “for his smartphone, Fuller said.

© Thomson Reuters 2020