As if Huawei was not already struggling enough, South Korean newspapers Chosun Ilbo and JoongAng Ilbo have reported that major South Korean Chip manufacturers, including Samsung and SK Hynix will reportedly cut off chip supply to Huawei, as U.S. sanctions kick into place in a week.
The Trump administration has been at Huawei’s neck for more than an year now, openly vilifying the company for engaging in data theft and accusing it of being an “arm of the Chinese Communist Party’s surveillance state.” U.S. had already banned the company from using American technology in its phone, but the administration was not content. This year, it imposed additional sanctions on the Chinese manufacturer, where non U.S. companies would have to get access from the U.S. Department of Commerce before selling products that employ the use of American technology (which, if you are talking about tech is basically everything).
Now, if you are Huawei, chances are, you are probably not going to get the approval you need. This is why many companies, including the TSMC (reportedly) have had to cut off supply to Huawei. Now, Samsung and SK Hynix will also join the list, or so is the speculation, as the aforementioned sanction kicks into place on 15th September.
It is fair to assume that none of the companies that have or will have to stop trade with Huawei are happy about it. The company recently emerged as the top selling smartphone manufacturer, and thus, provides a great business opportunity, which will be squashed by U.S. sanctions. Huawei was forced to go into stock mode after the ‘ban’ was announced, going on a buying spree to sustain business till it found an alternative. This move even drove up the spot price of DRAM or dynamic random-access memory, which created major profits for chip manufacturers.
In fact, of the $13.3 billion that SK Hynix made in the first half of 2020, $5.5 billion (or about 40%), came from exports to China, as Chinese firms started purchasing chips to supply to Huawei later on.
U.S. does not want Huawei to be able to operate at all, even going to the extent of threatening sanctions against SMIC, a domestic semiconductor company that was being eyed as an alternative supplier to the company. From the looks of it, America might have succeeded, as Huawei said earlier this year that it will stop manufacturing the Kirin chipsets.