Taiwan Semiconductor Manufacturing Co., the world biggest contract chipmaker, has halted new orders from Huawei Technologies in response to tighter U.S. export controls aimed at further limiting the Chinese company's access to crucial chip supplies, multiple sources told the Nikkei Asian Review.

"TSMC has stopped taking new orders from Huawei after the new rule change was announced to fully comply with the latest export control regulation," a person familiar with the situation said. "But those already in production and those orders which TSMC took before the new ban are not impacted and could continue to proceed if those chips could be shipped before mid-September."

The U.S. Commerce Department announced on Friday that all non-U. S. chip manufacturers using American chipmaking equipment, intellectual property or design software will have to apply for a license before shipping chips to Huawei.

"It's a difficult decision for TSMC as Huawei is the company's No. 2 customer, but the chipmaker has to follow the U.S. rules," another person familiar with the matter said.

Huawei, the world's biggest telecom equipment maker and second biggest smartphone maker, relies heavily on TSMC to manufacture its advanced chip designs -- including all of the mobile processors used in Huawei's flagship smartphones.

Huawei is TSMC's second-largest client only after Apple, accounting for 15-20% of its annual revenue. Huawei also accounted for up to 20% of SMIC's revenue, according to a Bernstein Research estimate.

According to the document posted online by the U.S. Commerce Department Bureau of Industry and Security, chip shipments bound for Huawei that went into production before May 15 and will ship before midnight Sept. 14 are not subject to the new rule. A license will be required for all other shipments.

This is now real war.

This action is 1:1 mirror of famous oil blockade of Japan.

Such way US try to keep initiative and be able to dictate date and time of conflict, while reducing time to prepare for growing competitor,

Decoupling

Its latest initiative has been to tighten the screws on the Chinese technology firm, Huawei. Last week, the administration announced sanctions against any firms using U.S.-made equipment that supply the Chinese tech giant. The chief victim of these new restrictions will be the Taiwanese firm TSMC, which supplies 90 percent of Huawei’s smartphone chips.

In other words, the Trump administration is committed not only to severing U.S. economic connections with China. It wants to put as much pressure on other countries as well to disentangle themselves from Chinese manufacturing. Taiwan, of course, has no particular love for Mainland China. It battles Beijing on a daily basis to get international recognition — from other countries and from global organizations like the World Health Organization.

But the Taiwanese economy is also heavily dependent on its cross-strait neighbor. As Eleanor Albert points out:"China is Taiwan’s largest trading partner, accounting for nearly 30 percent of the island’s total trade, and trade between the two reached $150.5 billion in 2018 (up from $35 billion in 1999). China and Taiwan have also agreed to allow banks, insurers, and other financial service providers to work in both markets."

And it probably won’t be Huawei but Taiwan that suffers from the U.S. move. As Michael Reilly notes, “Huawei’s size in the global market means its Taiwanese suppliers cannot easily find an alternative customer of comparable standing to replace it.” China, meanwhile, will either find another source of chips outside the U.S. sphere, or it will do what the United States has been threatening to do: bring production of critical components back closer to home.

IC market is weak part of Chinese strategy

IC production in China represented 15.7% of its US$125 billion IC market in 2019, up only slightly from 15.1% five years earlier in 2014, according to IC Insights. The share is forecast to increase by 5pp to 20.7% in 2024, said the research firm.

Although China has been the largest consuming market for ICs since 2005, it does not necessarily mean that large increases in IC production within China would immediately follow or ever follow.

Of the US$19.5 billion worth of ICs manufactured in China during 2019, China-headquartered companies produced only US$7.6 billion (38.7%), accounting for only 6.1% of the country's US$124.6 billion IC market, IC Insights noted. TSMC, SK Hynix, Samsung, Intel and other foreign companies that have IC wafer fabs located in China produced the rest.

Of the US$7.6 billion in ICs manufactured by China-based companies last year, about US$1.8 billion was from IDMs and US$5.8 billion was from foundries like SMIC

If China-based IC manufacturing rises to US$43.0 billion in 2024, China-based IC production would still represent only 8.5% of the total forecast 2024 worldwide IC market of US$507.5 billion,

Note that now around 85-90% of profits in electronic industry are located in the prices of complex LSI and CPu chips. Usually all fo this firms are owned by US, Israel, Japan and EU firms. ANd japan and EU are falling in this market.

@jleo

I propose to start new civil war to finally decide where to place it best :-)

The company alleged that Amazon and Google are providing web services for Dahua Technology and Hikvision, two Chinese blacklisted companies. Meanwhile, Microsoft’s services are reportedly being used by SenseTime and Megvii, two of China’s most valuable artificial intelligence start-ups.

A number of other U.S. technology companies were named, including website authentication and encryption companies Digicert, Lets Encrypt, Entrust and GeoTrust. Domain name hosting firm GoDaddy was on the list as well as cybersecurity company Symantec, which is now known as NortonLifeLock. Stackpath, which works on the delivery of internet content, was also named.

Twitter and Facebook were also named as providing content delivery network services to Hikvision.

CNBC has reached out to all the American firms that were named to request for comment on the report. Symantec declined to comment, and CNBC did not hear back from the rest of the companies.

China’s surveillance firms have been caught up in the tensions between the world’s two largest economies. The administration of President Donald Trump has carried out a campaign against Chinese firms, with Huawei being the most high profile target, that aims to cut off their access to American technology.

But Top10VPN’s Migliano claimed the company’s report shows a relationship still remains between the U.S. and China’s firms.

"Despite the Trump administration’s efforts to decouple the American and Chinese technology sectors, the continued presence of American companies in more discreet settings shows that cooperation between the two remains," Migliano said.

US is on dangerous path here.

@jleo

Current US plan is to use constantly printed money to finance their semoconductor industry, as well as TSMC and all friendly companies. No need to sell anything.

Pompeo : Today, I reported to Congress that Hong Kong is no longer autonomous from China, given facts on the ground. The United States stands with the people of Hong Kong.

First time clear open confession that US is standing behind protests and other things with only goal - make life of HK citizens much worse and try to introduce instability.

Without special banks related and similar preferences HK has no value. And note - it is US and not China who wants to cut them.

China need to act fast and swift, going into fast open fight with US and keep it up. Issue is with Chinese elites.

@jleo

US always cared about human right abuses only in places where it is lot of resources or they are on the territory of their economic or idealogic opponents. In all other cases you can have open drugs sales, children prostitution and evey other shit imaginable and will be best and nicest US friend :-)

A group of bipartisan, bicameral US politicians have drafted a bill that would “dramatically” increase investment in tech research and development. The Endless Frontiers Act would commit $100 billion over five years toward research in artificial intelligence, high-performance computing, robotics, automation and more. Another $10 billion would go towards creating regional technology hubs across the US.

Bad for free market, return to dark ages of US. :-)

South Korea has told Washington that restrictions on semiconductor sales to Huawei and other Chinese companies are “unacceptable,” according to industry sources.

Seoul is trying to mediate between Beijing and Washington following the US Commerce Department’s May 18 announcement that sales of computer chips to companies on its “entity list” will require a license if they are produced with US technology, even if they are produced overseas by foreign companies.

South Korea may be the odd man out in Washington’s strategy. Industry analysts say that a deal is possible under which Huawei would spin off its smartphone division, a major consumer of chips fabricated by TSMC, leaving a much larger market share to Samsung.

Samsung sold 59 million handsets in the first quarter of 2020, compared to 49 million for Huawei, 40 million for Apple, and 30 million for Xioami. In return, Samsung would continue to provide memory chips for China as well as fabricate Chinese-designed logic chips that are now produced in Taiwan.

Huawei executives say that the smartphone division has low margins compared to its core telecommunications equipment business.

Fear of retaliation

South Korea fears Chinese retaliation if the US compels Samsung to stop selling chips to Huawei and other “entity list” companies. Samsung is a major supplier of memory chips to China, but it has the capability to fabricate the custom-designed logic chips that power smartphones and AI servers.

South Korea relies on Beijing to keep North Korea in check, and the consequences of a rupture in relations with China would be dire.

https://asiatimes.com/2020/05/south-korea-is-the-pivot-in-the-huawei-wars/

ASEAN is now a bigger trading partner for China than the

China’s trade focus is pivoting. Due to its trade war with the US and the fast growing economies of its southern neighbors, China now trades more with Southeast Asia than with the US.

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Yet as the US’s importance to China declines, the member countries of the Association of Southeast Asian Nations (ASEAN) have stepped in. The ten members of the ASEAN trade bloc include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. These countries, many of which have rapidly growing economies, accounted for nearly 16% of Chinese exports in first quarter of 2020, the first time on record that the trade bloc accounted for a larger share of exports than the US.

Among ASEAN countries, Chinese exports have risen most quickly to Vietnam. As its economy industrialized, the country went from importing just $1 billion in goods from China in all of 2001 to over $60 billion in 2019.

https://qz.com/1861047/asean-is-now-a-bigger-trading-partner-for-china-than-the-us/amp/