TSMC halts new Huawei orders after US tightens restrictions

TSMC halts new Huawei orders after US tightens restrictions(asia.nikkei.com)

174 points by therealchiggs 6 years ago | 214 comments

To preface, firstly - I am a supporter of free global trade and greater collaboration between countries to maximize the benefit of each other.

The problem starts when there is a massive asymmetry in the trade. China has completely blocked US services from Google to Uber, and gladly accepts manufacturing investment - Tesla Shanghai factory, Intel's Chengdu factory, etc. because the CCP knows that they will gain tremendously by having IP physically based in China. It leaks like a sieve. I've seen it first hand (in semiconductor industry).

America should protect its own interests and interests of other democratic nations before they get eroded, dismantled and sold off to CCP's interests. If China doesn't want American software services running and fairly competing because of CCP surveillance requirements, well...then the US should block all Chinese services from exploiting users[1] and their data, may be EU should block Chinese services from running there until there is strict GDPR requirements and the data is located in EU datacenters. There should be independent datacenter security audits just like CCP wants keys to iCloud datacenters. That would just get us to the fairness level and that's still not enough - there should be a reverse asymmetry to make up for last 20 years of damage - incentivize US/EU services and manfuacturing while simultaneously imposing sanctions and import duties on goods/services made in China. Why not? Can someone tell me why the US/EU shouldn't do the same? I should not be able to buy $1.99 USB cable including shipping from China.

[1] https://citizenlab.ca/2020/05/we-chat-they-watch/

FooBarWidget 6 years ago | |

Wait a minute... You're pretending like trade is only "fair" if selling happens in both directions. Doesn't that fly directly in the face of what trade means?

You buy something, but you get value in return. That's why it's not called "donation". If the thing you bought is not valuable to you then why did you buy it in the first place?

Also, there is all this talk about "forced" tech transfers, but nobody forced US companies at gunpoint. US companies always had the choice to not enter the China market. They signed tech tranfer contracts, willingly, because they think the upsides (gaining a new market) are higher than the downsides, or that the downsides are manageable. The fact is, companies made a choice. And now the US government is making that choice for them?

From a national supply chain security or technology hegemony point of view it makes sense to deny certain transfers, but let's recognize that this is just geopolitics and not about ethics, fairness, etc. The rherotic about fairness just doesn't make sense upon further scrutiny. If the US government doesn't fully believe in free market, why not just go ahead and say so instead of all the mental gymnastics?

fermienrico 6 years ago | | |

> Wait a minute... You're pretending like trade is only "fair" if selling happens in both directions. Doesn't that fly directly in the face of what trade means?

I am confused by your question. How is this relevant to anti-competitive behavior of the CCP?

> You buy something, but you get value in return. That's why it's not called "donation". If the thing you bought is not valuable to you then why did you buy it in the first place?

Again, what does your patronizing clarification have to do with competitive marketplace where all parties can play fair? I am genuinely asking instead of just raising rhetorical questions. Literally the first line on Free Trade wikipedia page [1] says:

"Free trade is a trade policy that does not restrict imports or exports."

I thought I was talking about "Free Trade" as in freely be able to compete in China just as local companies. Perhaps there was a misunderstanding?

[1] https://en.wikipedia.org/wiki/Free_trade

ngcc_hk 6 years ago | | |

You cannot sell certain service to china. That is not fair.

tomp 6 years ago | |

I'm not supporter of free trade, I'm supporter of fair trade.

What you've described is simply - unfair. Another extremely unfair thing is different employment & environmental standards. If an EU company opens a Chinese factory just because they can make people work more hours and can pollute the environment more, I don't really see that as a "globalization benefit", but rather as "unlawful competition" which results in a race to the bottom (other EU/US companies being forced to open polluting exploiting factories abroad to compete on price).

That's why I strongly support tariffs on imported products, unless foreign companies/factories conform to strict standards and allow strict (and random) inspection that they do conform to said standards.

ClumsyPilot 6 years ago | | |

Are you sure your idea of fairness is right?

Consider Mongolia, perhaps they want to match EU employment standards but can't afford do. What are they suppose to do?

Suppose a democracy decided on different employment standards, should EU ban imports from US due to EU having higher standards of employee and environmental protection? How big does the difference have to be?

Does your free trade "fairness" account for the advantages US gets from being a global center of finance?

For disadvantages Vietnam has from being a recent colony and having a devastating war?

Does a country with loads of natural resources, or elderly population, or struck by natural disaster change the calculus?

Is this a robust rule you would like to see implemented, or is it just justifying current politics?

csense 6 years ago | | |

This is exactly my position as well. Every country in the world needs to be held to certain minimum standards.

If a country pays its workers pennies and craps all over the environment, it sucks for the people that live there, but really it's fine, they're a sovereign nation, nobody's gonna send in the troops over it.

Let's simply charge them enough to take all the money they save / make from these practices out of their pockets. If they don't pay up, the goods can't cross the border.

temac 6 years ago | |

There is the question of the long term effect of policies like even just threatening to block major Chinese actors thanks to doubtful instruments (the US is basically the only power that attempts and manages to rule the world by claiming and effectively constructing jurisdiction on everything that touches a US dollar, or any kind of tech that has even just minor relationship with the US). Meanwhile the China has already become a major power and even just the threat of a tech blockade will motivate them to develop their own; and we are now past the mere threat points...

What will happen when they will own all the supply chains and the buyers will have the choice between US tech, with their propension to want to rule the world, or Chinese tech; of course China may eventually do the same thing as the US, but strategically it is easy enough to not do it for long enough so that it is a major advantage to develop their market.

In (at least parts of) the EU, btw, we see this attitude of the US as a critical problem, more than a solution... As far as those kind of affairs are concerned, we don't view the US as a close ally but more as a distant cousin which is sometimes even a blatant economic enemy, especially when they attempt and do rule the world through $US and tech policies (and demonstrated, not only suspected, systematized world scale espionage). For example the embargo on Iran is particularly problematic. The China might be "worse" than the US in some dimensions, including critical ones, but there are some movement in the EU to guarantee/redevelop our independence from the US too, and this involves developing our own versions of more technologies which are for now originating from the US in a far too large proportion, given their policies and the risk they produce. (For some of those projects already existing, I suspect they initially won't be very successful, but that is another issue; if the problem becomes more pressing, there is no reason to not be able to do it: 10 or 20 years is an eternity in tech, but international equilibrium is a longterm affair)

maxdo 6 years ago | | |

Those actors exist only because China blocks US movies in their theaters to 10 a year(!!). US movie industry creates so-called joint movies with the only goal to avoid these quotas. That's how Chinese capital suddenly got access to US movie companies, Chinese actors start appearing in US movies.

It's a pretty much mafia move and has nothing to do with fair trade.

Somehow Korea managed to create best movie of the year without this mafia-style ruling. They use the weaknesses of regular people who want gains now.

georgeburdell 6 years ago | |

Right but what does that have to do with a Taiwanese company? That’s the part I have trouble with. According to the U.S.’s own policy, Taiwan and what we call China are the same country. So the U.S. is putting restrictions on a company for taking business from another company from the same country.

U.S. needs to work on making its foreign policy self consistent. Recognizing Taiwan as a separate country would be a great start (logically and morally)

adventured 6 years ago | | |

> According to the U.S.’s own policy, Taiwan and what we call China are the same country.

That's a mistaken interpretation and it has been clarified on numerous occasions.

There are two critical words to the context: recognize and acknowledge. And two separate entities to be considered as far as the US is concerned: China and Taiwan. The US has intentionally left the situation in limbo, to neither give in to China nor prompt a military confrontation between China and Taiwan.

The US does not officially recognize China and Taiwan as one. The US "acknowledges" China's position; specifically China's belief that they are one country.

Here is a good explanation:

> The United States did not, however, give in to Chinese demands that it recognize Chinese sovereignty over Taiwan (which is the name preferred by the United States since it opted to de-recognize the ROC). Instead, Washington acknowledged the Chinese position that Taiwan was part of China. For geopolitical reasons, both the United States and the PRC were willing to go forward with diplomatic recognition despite their differences on this matter. When China attempted to change the Chinese text from the original acknowledge to recognize, Deputy Secretary of State Warren Christopher told a Senate hearing questioner, “[W]e regard the English text as being the binding text. We regard the word ‘acknowledge’ as being the word that is determinative for the U.S.” In the August 17, 1982, U.S.-China Communique, the United States went one step further, stating that it had no intention of pursuing a policy of “two Chinas” or “one China, one Taiwan.”

> To this day, the U.S. “one China” position stands: the United States recognizes the PRC as the sole legal government of China but only acknowledges the Chinese position that Taiwan is part of China.

https://www.csis.org/analysis/what-us-one-china-policy-and-w...

FooBarWidget 6 years ago | | |

If the US recognizes Taiwan, doesn't that make even less sense? On the one hand you're saying that Taiwan is sovereign, on the other hand you're saying, we the US call the shots.

api 6 years ago | |

> To preface, firstly - I am a supporter of free global trade and greater collaboration between countries to maximize the benefit of each other.

The problem starts when there is massive asymmetry in those countries in terms of human rights, worker protections, and environmental regulations.

Criticize the US all day (I certainly can), but compared to the Chinese single party dictatorship the US is massively better in all those areas. The EU is even better than the US in some.

Occupational safety, environmental laws, and a free and open society imposes costs on business in the form of higher wages and overhead. It's impossible -- repeat, impossible -- for businesses in countries that operate to those standards to compete in a "free trade" regime with businesses in countries that do not. It's even worse when said countries (like China) also subsidize their industries and implement protectionist asymmetrical trade policies of their own.

I am all for free trade between free countries to within some reasonable minimal standard for "free." Trade with totalitarian and lawless regimes should be heavily taxed.

The free world should form a trade pact among its members with heavy tariffs for imports from non members.

One way of implementing it would be penalties for wages below domestic median, carbon emissions, and human rights violations. Use those factors to calculate a score and impose tariffs accordingly.

effie 6 years ago | | |

What is "free world"?

maxdo 6 years ago | |

What is more important to me, is 9-9-6, ecology, and the culture China tries to bring to the modern world. We have some rights for the middle class in both US and Europe. It's not perfect but it's so much better comparing even to 50 years ago, don't even try to compare now and 150 years ago. China is a treat to this lifestyle. It pushes us centuries back where regular people are just a source for monsters like Tencent.

I have a friend who worked in Tencent an iconic Chinese IT company that owns WeChat. They work from 9 to 9, six days a week. This is not an option. It's mandatory.

She literally escapes to the US because been a single woman in the early 30s considered a very bad misdo in their society. The same rule doesn't apply for man btw. So you as young female pushed to work 9-9-6 and do a very bad choice very early because you have to do it before 30, otherwise you're considered a renegade. Their society is an extremely racist and sexist to the point where their own parents don't want to talk to you if you're a woman who doesn't want to mary a Han-Chinese person( a title nationality in China).

I don't believe that scientists of the western world that put their life for a breakthrough in Computer science, agriculture, medicine, etc... dedicate their life for this kind of society where humanity is just a bio-mechanism that has one day off to clean the room and recover a bit. No social life... nothing. It's a huge gap. While the western world is debating about 4 days of work week china is double down on 9-9-6 which anti-human. You might remember GitHub issue with software developers complains about it and how china tried to stop this "leak" So no matter how stupid it's sound. It's a free world with the neo-feodal country as it is.

You vote for that with your money. Right now is a tipping point they either slow down and the CCP will collapse in a natural way or they will be ruling the world means their way to do business one day might apply to you.

I'm not trying to idealize US or any other country. EU seems to be much more socialistic, Canada seems to be much more inclusive ( at least Toronto). EU is putting so much more money into green energy compared to the US. But this competition is a much better direction rather than what Chinese leadership offers. Racism, sexism, neglecting ecology impact, no human rights, no socialism in any form, no rule of law. Don't get messed with US wrong things.

You have so many reasons to hate Donald and what he's doing but that doesn't automatically make his opponents saint. In fact, Donald will disappear in 0.5 or 4 years. And the threat to the middle-class people's lifestyle because of China and CCP will not.

savorypiano 6 years ago | | |

I think it's better to understand the culture rather than frame it as West vs East, democracy vs CCP, etc.

China has experienced grinding poverty for over a century, and have its work ethic to thank for pulling it out. 996 is enabled because of that history, rather than being a control plot. Even school kids have that kind of schedule.

Chinese people are very focused on the lower tiers of Maslow's hierarchy, and survival of the family is somewhat on the line if one of your only grandchildren is female and isn't married at 30. That's her life you say? Equally the parents can feel like all their sacrifices were for naught.

It's getting a bit tangential but the pattern in all societies is that women have the choice in mates and men have to be more willing to look abroad. So any racist sentiments would judge women harsher.

Regarding your other points, China has been much better about including minorities in its country than the West. It has furthered environmental controls vs. Trump reversing them, and most of the greening in the last decade occurred in China (and India). It has sensible universal healthcare and supported its citizens during Covid-19, unlike the US which passed legislation that supports big business, letting small ones fail and charging its own citizens for evacuation flights.

Anyway, the point is that once we understand the history we need not paint China as the malevolent entity that is common in media.

DiogenesKynikos 6 years ago | |

> The problem starts when there is a massive asymmetry in the trade.

Up until a few years ago, there was a massive asymmetry, but in the opposite sense to the asymmetry that Americans usually complain about. Because China was a developing country with very little capital but a huge labor pool, there were huge investment inflows into China. Western companies took advantage of cheap labor in China, setting up factories to produce for Western consumers. Chinese consumers were almost completely out of the picture. China did not have the capital to invest in foreign countries, so the investment was almost entirely unidirectional.

That began to change as China's workers began to earn more, and Western companies jumped into the Chinese consumer market (Starbucks has thousands of locations in China, VW sells millions of cars in China a year, and so on for countless Western companies). Whereas you would see almost no Chinese brands in Western consumer markets, the Chinese market was awash with Western brands.

Now, Chinese brands are starting to enter Western markets, and China also has capital to invest abroad. The relationship is becoming more bidirectional. To the United States, which was happy to exploit cheap Chinese labor and to sell airplanes to the Chinese market, the idea that China might be transforming into a serious economic and political competitor is alarming. That's why there are suddenly these myopic complaints about the relationship being one-sided.

> China has completely blocked US services from Google to Uber

Google is blocked in China for political reasons. Uber was allowed, and indeed operated in the Chinese market for a number of years. It failed there, because there was strong competition from companies that understood the local market and local consumer preferences better. Let me ask a simple question to test if the relationship really is asymmetric, and in which direction the asymmetry points: Do Chinese brands have a larger presence in the US than American brands have in China?

fermienrico 6 years ago | | |

You've made some good points but what about the fact that everything in my living room, I mean everything from the paint on the wall to the keys on my Macbook - everything is made in China. I say that influence is of material value (goods) whereas Starbucks entering the Chinese market seems like a distraction.

d2161 6 years ago | |

Trade is always beneficial to both sides. I find it quite silly for people who say they support free trade but then claim this kind of bs. If the trade isn't beneficial, then they simply won't trade. And if is then they will receive a benefit from the trade. But trade is decisions by individuals, and shouldn't be up to donald tramp and his tramp crew. What your describing is asymmetry between countries in trade. The Hecksher Ohlin model describes the relationship quite well and the relationship is natural. For the same reason the whole complaing about how X country is subsidising their Y products and ruining our country, is just rich corporate bs. It's focused on business owners and not consumers. Why should I pay for a product when I know my marginal utility/marginal cost is higher with the other product? So I can put more money into some rich asshole's ass pocket? While you might be rich enough to sit complain about things being too cheap, some of us have bills to pay. And I see no reason to pay more so you can make money off the rest of us.

rtikulit 6 years ago | | |

I take your line of argument as meaning "there are no legitimate medium or long-term interests for countries, for societies or for humanity". Or, alternatively, "the pursuit of short-term interests will always result in long-term good outcomes."

I really don't agree.

Were I ungenerous, I could interpret "I see no reason to pay more so you can make money off the rest of us" as "If local conditions permit me to loot someone else's future for my own present benefit, I will do so."

Furthermore, "trade is always beneficial to both sides" is clearly false, unless you define trade as "that which is always beneficial to both sides."

(I agree as a matter of fact that free trade and free markets are in general the most effective way to allocate capital, decide prices, maximize the realized value of goods, and provide individual economic autonomy. I do not, however, see them as end-goals in and of themselves. I do not see them as infallible in fulfilling personal or human values. I do not see them as especially resistant to having their function subverted.)

powerapple 6 years ago | |

Google left China. Uber sold their share of market to Didi. US has blocked many deals when Chinese companies are involved. There is never free global trade, it is just exploitation at different scales. Global trade happens because some countries need dollars to buy weapon, oil and technology. You buy $1.99 USB cable from China, and the profit from 100 million cables will be used to buy intel chips and Boeing airplanes. It is the same that the profit of 100 kilos of coffee beans from Africa countries will be used to buy weapons from US. We don't need global trade if there is no weapon in the world.

leemailll 6 years ago | |

>China has completely blocked US services from Google to Uber

Both are wrong, Google quit from China, and Uber sold its China division to a rival company.

summerlight 6 years ago | | |

Wait, are you suggesting that Google/YouTube is still accessible from China?

myopenid 6 years ago | |

China blocked American services in the mainland precisely to prevent intel gathering on the Chinese masses.

And it's ironic for you to say the CCP wants keys to iCloud, because your government literally forces American companies to hand over the keys[1].

[1] https://www.reuters.com/article/us-apple-fbi-icloud-exclusiv...

myopenid 6 years ago | |

> It leaks like a sieve. I've seen it first hand (in semiconductor industry).

There is this thing called knowledge transfer, and you do this when you change jobs. Are you suggesting that the employee work in the same company indefinitely?

> well...then the US should block all Chinese services from exploiting users[1] and their data

Which is exactly what China is doing to you.

jjeaff 6 years ago | | |

The US requires due process where companies like Apple can (and do) fight the government in court where a judge must decide whether the request is lawful/constitutional. Can the same be said for the CCP? And even if such a court exists in the CCP, if a company did fight a data request from the CCP, would the executives then "disappear" never to be seen again or perhaps disappear and then show up months later apologizing profusely for being so wrong in not following the wishes of the CCP?

est 6 years ago | |

> China has completely blocked US services from Google to Uber

China blocked Google, but not Uber

People also invent false lies like "China blocked Amazon, eBay, Yahoo" etc.

astatine 6 years ago | |

Here's the thing. Very likely Chinese companies with interest in doing business will comply with any local regulation. That leaves everyone red faced with no further arguments other than raise the concern that you can't trust that there is no backdoor, that there are no secret strings attached etc.

maxdo 6 years ago | |

Locking services is one thing, take as an example Xiaomi which started as an Apple copy. Right now it's a multibillion company. If copyright exists on China soil this company wouldn't exist at all and it will not take shares it has now. This is very basic path for many Chinese companies, yes, once they reach some volume they start to follow some rules since some grey area countries might ban them but till that moment they enjoy absolute freedom.

ClumsyPilot 6 years ago | | |

The current IP regime is deeply problematic and I would not enourage other countries to copy it blindly.

Also in some societies the idea of intellectual property is not widely accepted, and obviously their laws and behaviour will reflect that.

LatteLazy 6 years ago | |

I don't think you're wrong but...

Good luck convincing the average consumer (voter) to do without for a while and then pay more after that. They'll lynch you if they can't get the latest iTurd for 499.99 plus tax.

Also, as long as the CCP run China, they'll be stronger than the west (consumerism and short-termism and Chinese abuses of them aren't just US issues). We need them to democratise, consumer domestically and sort out other issues (wet markets, treatment of minorities). That's the long term win here. Convincing them to treat Google and Uber fairly is nice but it's not going to make them reasonable partners in 2,5,10,50 years time...

hello_moto 6 years ago | | |

Wet markets is a too general/vague.

Wet markets exist are all over the world with similar setup like the one in China.

ClumsyPilot 6 years ago | | |

Perhaps we should get a hanfle on short-termist and consumerism before they doom us, with or without China

dirtyid 6 years ago | |

> China has completely blocked US services from Google to Uber

Western social media platform are welcome to participate in China if they follow local laws - in this case onerous censorship requirements, which every domestic company comply to. That's what project Dragonfly was for, but internal Google politics killed it. Bing still operates fine in China while Google and Facebook still makes billions off Chinese adsales. For some reason people find it appalling that US companies have to operate by foreign laws when operating abroad. As far as I know, TikTok keeps US data on US servers. I'm not sure about Europe, but data siloing regulations is becoming the norm as countries realize the importance of domestic information control. So yes, the US/EU should do the same and if Chinese companies don't want to comply they should get booted from the market.

Uber's story is more complicated. At the end of the day, Uber and many Chinese rideshare startups got out competed by Didi Chuxing. One narrative is various local and national regulations on ride sharing made gave domestic entrants and unfair competitive advantage, but Uber had a strategic partnership with Baidu (to circumvent Google Map block) which had every interest in Uber succeeding.

foepys 6 years ago | | |

Didn't China require any foreign company to be controlled by Chinese to get access to the Chinese market?

I heard that they relaxed those restrictions a bit to appease the WTO but in practice are often still denying basic permits for foreign companies until they can show to have a ≥51% Chinese share.

random314 6 years ago | | |

> For some reason people find it appalling that US companies have to operate by foreign laws when operating abroad.

Sure, that is the reason why people were appalled - some reason -can't clearly put a finger on it.

salimmadjd 6 years ago |

Anyone else feels this is shortsighted?

Estimates are that China is 10 years away to be able to build chips domestically that can compete with TSMC. Mostly because a lot of the precision chip making technologies are hard to make and are only made by a few manufactures and their exports are controlled.

However, I feel like our new competitive mindset is using the wall to block others. To wall off China to wall off immigrants.

I love to see manufacturing sector return to US and protect US jobs, however, it seems like instead of investing into the future, like we had in the 50s, 60s, 70s we are spending our limited resources waging all types of wars and then using our might to block other countries now.

We've lost our ability to make political decisions and planning with a long-term vision, and if we think building walls will stop innovation in other places, we're wrong.

All we're doing is setting back China for a few years, fueling a nationalistic fervor to motivate their public even more and once they've caught up, they'll even be stronger and more competitive.

While we might keep the aging Western Europe under our pressure, rest of the emerging world will be under China.

I'm also really curious how this action will ultimately impact Taiwanese views of merging with China. It's possible this might create more sympathy and create a massive defeat for the nationalist side of Taiwan and the country might vote to merge with China.

What would we do then? Stop Apple from buying chips from TSMC?

billfruit 6 years ago |

"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."

Isn't that really crossing the line; It implies that if a country buys American Equipment/Software then they are at the whims of American policy; American equipment comes with strings attached: Really does not look appealing to many countries this.

What if Huawei rebrand themselves or try to gain a new identity etc, then US regulations has to catch up again.

Moreover is this some sort of punitive measure against Huawei? What if they approach US courts, what shall be the outcome?

cesarb 6 years ago |

Suppose the actors were different: wouldn't this be like, for instance, Germany forbidding a Brazilian company from exporting a widget it manufactured to the USA, just because the Brazilian company had used a German-made lathe in its Brazilian factory to make the widget?

Traster 6 years ago | |

I don't think you can talk about this in terms of just rules. What is happening here is one world superpower is using all the leverage it can to attack another world power. Germany isn't going to do this firstly because it doesn't have the leverage and secondly because they're not interested in playing that sort of raw power politics. This is how cold wars are conducted, the belligerents pour resources into strategically important partners. In this case the US is applying pressure on TSMC to damage Chinese technology companies, which they need to do because their local strategic manufacturer(Intel) is falling behind. You're going to continue to see the US find reasons to pour money into partnerships with everyone on China's front door. Meanwhile China will pour resources into partnerships with Europe, Russia and Australia to try and pry US partners away.

There's no "Fair" in this situation, there's only "Winning" by forcing China into compliance with US demands.

Udik 6 years ago | | |

> forcing China into compliance with US demands.

Except that, as it's clear from the rest of your comment (with which I agree fully) there are no real demands from the US to China except a demand for subalternity. In other words, the only reason behind this moralising and chest-beating is simply that the US wants to keep its power by obstructing a competitor.

_ph_ 6 years ago |

This is a disaster and can get ugly very quickly. Whatever the concerns of the USA against Huawei are, trying to destroy the company by pressuring international companies in severing all ties is an extremely hostile movement.

Next step, as China has already hinted towards, is actions in China against Apple. And we don't know how further the escalation will go. So far, any ambition of China towards Taiwan has been limited by the fact that China depends quite on Taiwanese fabs. Remove that, and accidents might happen... which would harm the whole world.

someperson 6 years ago | |

This won't kill Huawei at all, and instead of manufacturing chips with TSMC, won't they'll just switch their HiSilicon Kirin chip manufacturing to SMICs' 14nm process? I know it's no longer useful to compare process node sizes between companies anymore, but for what it's worth Intel is still stuck on 14nm and they're still considered by many a competitive chip-making titan.

Also remember when United States pulled a similar stunt on ZTE a few years ago (banning us of American parts), only to reach an agreement and walk back the decision?

jacquesm 6 years ago |

And thus enables the Chinese semiconductor industry.

dannyw 6 years ago | |

The Chinese semiconductor industry is going to happen no matter what; it is one of their strategic priorities and they have been moving in this direction for a long time.

This is about making it harder and inflicting some pain on them.

jacquesm 6 years ago | | |

The effect will be the exact opposite, it will make it harder and will inflict some pain on them in the short term, but in the longer term any internal resistance has just evaporated and they will double down on this.

_ph_ 6 years ago | | |

This is most of all forcing a build-up of Chinese semiconductor industry independent of the USA. So not using any USA IP, software or anything. It forces China to build anything they need vs. buying it abroad.

cobookman 6 years ago | | |

Just to back it up with a source: https://www.csis.org/analysis/chinas-pursuit-semiconductor-i...

catalogia 6 years ago | |

If that were obviously true, then why wouldn't the CCP just ban the import of silicon? Same effect without having to wait for America to do it, no?

jacquesm 6 years ago | | |

Assuming that's a serious question: they don't have drop in replacements right now.

azinman2 6 years ago | |

Do you think the timelines would really be any different?

jacquesm 6 years ago | | |

Yes, this will be a huge accelerator. The US is showing China that they can not depend on foundries they do not own lock, stock and barrel and that are on Chinese soil. It's totally obvious what this will lead to. Next: restrictions on selling stepper tech to the Chinese. Wonder how ASML's stock will respond to this news, quite a few reasons to go either way.

ekianjo 6 years ago |

Technically it should not be an issue since Taiwan does not exist on paper and therefore China's CCP should have no problem asserting full control over TSMC operations. At least if we believe the CCP's version of the world.

tinza123 6 years ago | |

Taiwan is a region and a very important one, no one was denying that, even the Chinese government. The dispute was on what a country means and it has complicated historical reasons on both sides. Same thing goes for why Guam and California are not the same political entities among the US, or why Spain doesn't recognize Catalonia.

Don't be ignorant and try to judge on things you don't fully understand.

oblio 6 years ago | | |

> Don't be ignorant and try to judge on things you don't fully understand.

The first bit was ok, but this is uncalled for.

ekianjo 6 years ago | | |

The UN is pretty clear on the fact that populations can claim to be governed by themselves if there are enough of them. Which is exactly what is happening with Taiwan. What is so difficult to understand?

wbraun 6 years ago |

What are the near term implications of this? I was under the impression that this was always considered a pretty extreme option. Between this and the plans for the TSMC fab in the USA I wonder what suddenly shifted in US - Taiwan relations.

Does this mean that Huawei loses the 5G competition because they are not going to be able to get the chips they need fabricated?

Is China going to try to split up Huawei into a bunch of "totally not Huawei" companies?

teruakohatu 6 years ago | |

I am sure 5G chips can be built with older processes. They might just need more cooling and be less efficient.

kyboren 6 years ago | | |

That makes Huawei's 5G chips much less commercially competitive, giving Qualcomm a leg up in the handset market and making it much harder for Huawei to win.

However, for base stations, which are the real prize, Huawei already has a ~1y stockpile of Xilinx FPGAs, so any effects on Huawei's 5G market position will take some time to manifest.

strooper 6 years ago |

China has already bought the second (Russia) and third world (not in terms of wealth, rather actual third world) with the cheap variants of original technologies. Intellectual property is meaningless in this arena, and so is reasoning. Moreover, America has stopped streaming the "American dream", stopped winning "friends and allies", and is flexing muscles on the rest of the world.

I thought this war of the giants will remain paused for the rest of the covid-19 situation, however, it seems unlikely before some major causality. And Huawei seems to be in the center of the stage.

tanilama 6 years ago |

TSMC had denied this through Chinese media.

Might need to wait for sometime to see exactly what its position in all these.

My bet it will eventually comply but leave some vagueness here and there. After all, hurting TSMC is hurting the world.

Nokinside 6 years ago | |

The timing of this with the mixed messages makes me think that Washington tried to dupe TSMC/Taiwan.

Washington waited until the new fab deal was done before putting TSMC into crossfire. If that's the case, it probably backfires and the US must make hard choices.

DevKoala 6 years ago |

I always thought that enforcing IP rights overseas was a pipe dream. Amazing.

est 6 years ago | |

How is Huawei violating America's IP exactly? Huawei stole 5G from US?

DevKoala 6 years ago | | |

This is one of the most famous accounts: https://www.secureworldexpo.com/industry-news/8-steps-huawei...

snovv_crash 6 years ago | | |

They sold tech to Iran despite embargoes.

trixie_ 6 years ago |

Can we get the TSMC fab built in America first before stirring things up?

dannyw 6 years ago | |

TSMC's fab is in Taiwan, not PRC.

Given the critical nature of semiconductors, if China invaded Taiwan it's hard to see the US not getting involved.

TSMC is Taiwan's largest company.

trixie_ 6 years ago | | |

I know it's in Taiwan, and if this escalates, the supply chain will get cut.

When it comes to 'invasion', there's no chance of defending Taiwan unfortunately. No one has the stomach for that. It's easily one step away from a nuclear war. You think coronavirus is bad...

fluffything 6 years ago | | |

> if China invaded Taiwan it's hard to see the US not getting involved.

It's pretty much impossible to see the US getting involved.

The UN doesn't recognize Taiwan as an independent country, so China would just be exercising their authority over a chinese company, just like they do with Huawei, Lenovo, and many others.

NATO couldn't help either, because the US is not being militarily attacked by this. And well, the US has severed both their military ties with NATO, as well as their political ties with all countries in NATO (Paris agreement, Iran nuclear deal, tarifs, empty embassies, in bed with North Korea...). Also, many NATO countries are in bed with China economically, building the new Silk Road...

So... if China were to grab TSMC, and the US would try any kind of military action, who would support the US ? Europe, Russia, South Korea, Japan, South America, the Middle east, Australia, ... they would all stand by China. The US has been screwing them over the last 4 years, while China has been giving them money for them to return them the favor in a time like this.

Or do you imagine Trump going throughout the world kissing others asses to get their support?

Yeah, no. If Trump was "brave" enough to take military action, it would be game over before it even starts: world-wide embargo against the US, all US international companies assets frozen, the S&P500 would hit zero in a matter of days, inflation would explode, the troops wouldn't be getting paid, etc. The largest military force in the world would crumble in a week before even taking the first shot.

chvid 6 years ago |

By the looks of it, this is major news and a big escalation of the US China "trade" war. But I notice this:

"TSMC shares in Taiwan were down more than 2% in Monday morning trade, while the benchmark index was down less than 1%."

So the market seems to think that is probably not such a big deal or guesses that a solution/workaround will be found. Also that the US may cut-off TSMC supplies to Huawei has been rumoured for about a year now and is an extension of the restrictions on Google software/services and the ARM chip designs.

russli1993 6 years ago |

“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.”

What? You just tried to bankrupt company by cutting off all of their suppliers and partners of business. Of course they will try to survive by trying to self-reliant. The company employs 100,000 people, is super important to the local economy and employment in the shenzhen area, and has over 50% of the shares in China's entire core internet infrastructure. If Huawei does not get the supply it needs, it cannot serve the entire China's core internet, do you know how much danger that causes to China's communication infrastructure security? How much economic damage to the country it's going to be? This actually directly harms China's national security. Whereas the US claims Huawei harms its national security, when Huawei is not even in the US. When Huawei gets killed off, how do you tell the workers of Huawei and their families, that their livelihood is gone because by its killed of by you, which is a foreign government to them. Are you sure you can deal with the anti-American sentiment afterwards. There is a saying in Chinese "cut of the way someone earns money is equal to killing their parents" （断人财路如杀人父母）You also know that the average Chinese person is super proud of Huawei as a brand right?

This rule change effectively forces all companies in the world that is in the semiconductor industry to abide by US governments wishes. TSMC 7nm processes has less then 10% of US IP and technology. It was developed by Taiwan people with TSMC own investment. But they invariably could use a technology that is in the ERA. Hell, Intel processors is one, and god forbid if the production line has a computer that contains Intel chips. You could argue that this Intel chip assisted in producing Huawei's chip no? Where do you draw the line? The US government can just decide how to enforce this based on their feelings of the day? Are you sure this the standard for international justice?

For alleged IP infringement against Huawei, get the evidence and sue the company at court. I am all for it, as long as there is trial. So far there are two cases IP infringement cases that I know of, 1 in 2003 with Cisco that settled out of court. 2 with T-mobile in 2013 with regarding a phone testing arm. But Huawei's main business is base bands, routers, and consumer electronics. By the way, Ercission has cross licence agreement with Huawei to access Huawei's 5G patents. Huawei has many invention patents in 5G, that is recognized globally. I don't get where the theft of IP comes from that warrant the company to be killed off.

For security issues. Let the market decide, let the customer decide. Customer should be able to make a comprehensive product selection process based on their needs. And if the market says no to Huawei, then Huawei is dead. But let the market decide. US companies can also compete with Huawei, and say they are more secure. Huawei sucks. That is all fine. And I am also fine with the US government producing security assessments on Huawei, and telling every country on earth to not use Huawei equipment. That is US government's right. But at least the customer can decide for themselves if Huawei is worth anything. If Huawei is dead because of that, then sure. Its all fair and square. The US can also form alliances with other countries and make sure the country ban Huawei equipment in their countries too. That is the US right too. There are so many ways to compete with Huawei.

US gov's action is as if, China ordered that every country in the world shall not do business with Microsoft, and forces Microsoft to go bankrupt right now. Imagine if the Microsoft cloud and office365 stops running because of that. US would probably sent warplanes to China by then.

Huawei's 4G technology worked really well for China's environment and was affordable for mass development. It is key enabler in allowing the country to deploy 4G to almost everywhere in China, even the remote villages. This enabled everyone with smartphone to use the internet. And as result, services like mobile payment, shopping, gaming all flourished in China. It in turns create a massive cellphone market in China. Apple, Qualcomn, Xllinx, and host of consumer product providers, or Huawei's US suppliers all benefited from this. Competitions in the phone space also pushed the innovation and pricing for smart phones. Huawei was one of the first to push smartphone camera quality and added multi-focal lengths to phones. It pushed Apple and Samsung to innovate on cameras too, look at where smartphone photography has become. I believe US and Chinese technology companies can work together in their respective markets, to make technology more useful, enrich the economy, and make people's lives better. Its not a zero sum game. But the US government is viewing it as such. If US wants to win, China must lose.

With the US government essentially taking the world's companies into hostage in killing off Huawei, I am not sure if US Gov is being a responsible world citizen.

augustt 6 years ago |

Wow. Can someone more familiar with stuff explain how much of a big deal this is? Does this completely kneecap Huawei/China?

dirtyid 6 years ago | |

Huawei shifted Hisilicon 14nm orders from TSMC to SMIC a month ago in anticipation. I think most of their router hardware is domestic components except from Xilinx FGPAs, but alternatives are difficult to source. The articles mention Huawei's been stockpiling components, it's hard to say how long that will last. Last I read they've already burned through a bunch and they've been rolling out domestic 5G during covid19. There should still be enough runway for a few political exchanges i.e. putting US companies on Chinese unreliable entity list to see what happens.

This is a "bigger" move than expected - the anticipated escalation was US reducing US origin tech % to <10. TSMC believes their 7nm was around 9-10% so there was a chance Huawei orders was still viable. Now it's a blanket export license requirement. While the article only covers Huawei, I think it's a broader blanket that applies to all Chinese companies with military connections, which is basically an impossibly difficult task for any company to determine. The impact is unclear. This is one move short of kicking Huawei off dollar trading.

dannyw 6 years ago | |

In the immediate future, Huawei will be fine:

> Huawei has been preparing for such a move by the U.S. since the end of last year, including stockpiling more than a year's worth of networking equipment-related chips, especially for its crucial telecom equipment and carrier business, sources told Nikkei Asian Review.

Polylactic_acid 6 years ago | | |

And in the distant future, all common chips and designs will be made without the US.

cobookman 6 years ago | | |

Wouldn't Huawei not be able to sell devices made with those chips in western markets due to the restriction?

ngcc_hk 6 years ago |

Let us all free trade for all, but not china can trade with works but the world cannot trade with China.

synaesthesisx 6 years ago |

As someone long Qualcomm this is excellent news.

dannyw 6 years ago | |

Why? Qualcomm is a US company, subject to the same export restrictions.

lwneal 6 years ago | | |

Qualcomm and Huawei are both "fabless" semiconductor companies, like NVidia or AMD. These companies design chips, but do not own foundries to manufacture them. TSMC is a "pure-play foundry", a company that does not design chips, but only manufactures chips that other companies have designed. TSMC is the largest and most advanced foundry.

Huawei (a Chinese company) and Qualcomm (a US company) both design modems[1]. Huawei and Qualcomm both need TSMC's fabs, or else they will not be able to manufacture their most advanced designs. If Huawei can't buy from TSMC, then new Huawei modems will have to be manufactured with inferior or more expensive alternatives.

With Huawei chips now more expensive or less performant, products designed by Qualcomm will be better in comparison. Presumably, this will cause Qualcomm's stock to rise in value, although it may be a net negative for the worldwide economy.

See also the recent announcement that TSMC reached an agreement with the US government to move some of its production to Arizona [2].

[1] Huawei's Kirin/Balong chips directly compete with Qualcomm's Snapdragon chips: both are currently manufactured on TSMC's 7nm process.

[2] https://news.ycombinator.com/item?id=23187698

ac29 6 years ago | | |

Huawei is a competitor in the mobile SoC field.

kristianov 6 years ago | |

Laugh until China bans Qualcomm...

DevKoala 6 years ago | |

Doesn't Qualcomm lose all future revenue coming from Huawei in this scenario? Please explain.

synaesthesisx 6 years ago | | |

Huawei is one of their largest competitors in terms of 5G chipsets. Restrictions on Huawei would also likely help US companies like Apple, so this move would be a net positive.

whoevercares 6 years ago |

Good move for China. Time to spawn our own IC industry

forgot_again 6 years ago |

Escalation between the US and China is inevitable.

China is fundamentally opposed to everything the US and Democracies around the world stand for politically. Likewise, the US and friends are fundamentally opposed to everything China stands for politically. There is no Universe in which two diametrically opposed juggernauts do not come into conflict. Conflict is simply inevitable when the stakes are this high and there is no greater power able to force deescalation.

Either China converts to Democracy or the US and friends adopt Chinese style authoritarianism, or one of the two belligerents collapses either on its own in the manner of the Soviet Union, or by force.