Samsung Electronics and SK Hynix will stop supplying semiconductors to Huawei starting Sept. 15 in compliance with U.S. sanctions against the Chinese tech giant. As Huawei is a major customer of the two Korean chipmakers, the chip supply suspension is expected to kindle far-reaching repercussions.
The U.S. Department of Commerce announced guidelines on additional sanctions against Huawei on Aug. 17 (local time). The main point is that no semiconductors manufactured based on U.S. technology and software can be supplied to Huawei without U.S. approval.
Until now, the United States has prevented the use of U.S. software and equipment in semiconductors designed by Huawei. This time, semiconductors not designed by Huawei were also included in the sanction list. Amid the worsening trade dispute between the United States and China, Washington's strategy is to undermine Huawei by blocking chip supply to it. Semiconductors are essential for Huawei’s products.
As a consequence, Samsung Electronics and SK Hynix can only supply semiconductors produced before Aug. 17 to Huawei until Sep. 14. This applies to all semiconductors, including memory semiconductors such as DRAMs and NAND flashes and system semiconductors.
Contrary to some media reports, semiconductor supply to Huawei will not stop immediately. Samsung Electronics and SK Hynix are expected to export their products to Huawei as much as possible until Sept. 14.
Some damage will be done to Samsung Electronics and SK Hynix, industry observers say. Huawei is one of Samsung’s top 5 customers, the others being Apple, Deutsche Telekom, Tektronix and Verizon. These companies accounted for 12 percent of Samsung Electronics' total sales as of the first half of 2020. SK Hynix does not disclose its major customers. Market watchers estimate that Huawei accounts for about 3 percent and 11 percent of Samsung Electronics and SK Hynix’s sales, respectively.
Chip exports to Huawei will not be completely blocked. The U.S. government will allow chipmakers to sell semiconductors through a pre-approval process beginning on Sept. 15. However, most experts believe that such a process will be useless in the current situation.