Categories: Technology

US Foreign Direct Product Rule is hellbent on stopping Huawei from gaining dominance

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The U.S. is hellbent on stopping Huawei from dominating the smartphone and 5G industry around the world.

The current Foreign Direct Product Rule will limit all of Huawei’s dealing with any American made technology. During this pandemic, it would seem as if only Huawei is getting good news from all fronts of its businesses.

Huawei experienced a strong positive growth during the first quarter. The company is also closing 5G deals with countries continuously despite constant U.S. pressure.

There is just no stopping the behemoth from taking the world’s largest slice of the pie in telecom innovation. Nevertheless, the U.S. is still trying its best to prevent this from happening.

New proposal for the U.S. Foreign Direct Product Rule (FDPR)

The policy mandates that shipments of all products that contain at least 25% U.S.-origin content by value may be controlled. This means that shipment to other countries of large devices, even though only 25% of it has American origin, may be stopped.

There is a new proposal to even further lower the 25% threshold to just ten percent. That would directly affect majority of items that ship out of the U.S. going to other countries.

The design of the new proposal might have had Huawei as the main target.

TSMC and the effect of the new FDPR proposal

Huawei heavily relies on the production of TSMC for its Kirin 5G capable chip sets. Several reports have shown that Huawei has foreseen that TSMC might be placed in a difficult position to fulfill its future orders. Therefore, the company has made future plans.

Huawei is slowly shifting its chipset production to Semiconductors Manufacturing International Corporation (SMIC). The Chinese company is also considering moving its chip set manufacturing to Samsung’s foundry, but that remains to be seen. Should the new FDPR proposal push through, TSMC’s hands will be tied even further by U.S. control.

The components of TSMC’s chipsets fall below the original 25% threshold set by the FDPR. With the new ten percent threshold proposal, the Kirin chipsets made by TSMC will be completely put to a halt. The U.S. government may order TSMC to cease any shipment to Huawei.

TSMC and its U.S. reliance

Huawei is TSMC’s second biggest client after Apple. The foundry is 60% owned by U.S. shareholders so the company falls within the bounds of the FPDR rule and the U.S. Administration’s mandates.

Losing Huawei as the second main client will be tough blow to TSMC. Nevertheless, the present administration is strongly backs up the company’s development. In fact, President Donald Trump is pressuring TSMC to construct a facility within the U.S. soil before the November elections.

Image courtesy of @HuaweiMobile/ Twitter

Steven Hung

Published by
Steven Hung

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