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Trade war

Germany's Infineon suspends US shipments to Huawei

Chipmaker halts deliveries to review impact of curb on Chinese tech giant

TAIPEI -- German chipmaker Infineon Technologies has suspended certain shipments to Huawei Technologies, three people familiar with the matter told the Nikkei Asian Review, in the first sign that Washington's crackdown on the Chinese tech giant is beginning to choke off vital chip supplies from non-U. S. companies.

The German chipmaker confirmed to Nikkei that it was halting deliveries of products originating in the U.S. due to the new rules. However it insisted that the majority of products supplied to Huawei had not been affected by the U.S. export controls and these deliveries continued.

Infineon's decision to stop U.S. deliveries came after the U.S. Department of Commerce last week red-flagged Huawei by putting it on the so-called Entity List, which requires American companies to obtain a license if shipping products to the Chinese company. Foreign companies using a certain amount of American technology for products sold to Huawei are also subject to the same restriction, lawyers have told Nikkei Asian Review.

"Infineon decided to adopt a more cautious measure and stopped the shipment. But it will hold meetings this week to discuss [the situation] and make assessments," one of the people said. Another source said the German chipmaker wanted to avoid potential legal problems while it assessed compliance requirements. It was not yet clear whether Infineon's suspension was only temporary and if it would resume doing business with Huawei after it clarifies the legal issues this week, one of the sources said.

The German group said in a statement to Nikkei that due to the new U.S. rules "certain compliance measures are required to enter into force, according to which the delivery of goods originating in the U.S. have to be terminated by Infineon." It said it had been able to adapt its supply chain to ensure continuity of deliveries. "We have a set of measures in place to thoroughly monitor any possible changes in the legal frameworks of our respective markets, enabling us to make adaptions in our international supply chain. This enables us to make efficient and proactive adjustments supporting our ability to deliver wherever possible," the group said in a statement.

While Infineon's sales to Huawei amount to a fraction of its annual revenues -- just 2% according to Goldman Sachs analysts -- the German company's decision could have serious repercussions for the Chinese tech giant. It is already seeing sources for vital supplies to its telecom equipment and smartphone businesses begin to dry up.

The move could influence other key European and Asian suppliers to take a similarly cautious approach, industry sources told Nikkei. Under the U.S. rule, companies that fail to obtain a license for supplying an entity on the list risk being blacklisted themselves.

Huawei late Monday evening maintained that its "supply chain relationship" with Infineon had not changed. "We categorically state that Huawei's business with Infineon continues as usual," the company said in a statement.

"Infineon is an important partner of Huawei. In recent years, the two parties have maintained sustained and rapid growth in their business cooperation, and Huawei appreciates such vigorous support from Infineon."

U.S. chipmakers Qualcomm and Qorvo have already stopped shipping products to Huawei. Neither company responded to requests for comment.

American memory chipmakers Micron Technology and Western Digital also stopped shipment to Huawei, another source told Nikkei. Micron confirmed to the Nikkei Asian Review on Monday in a statement that "As a U.S. based company with a global footprint, Micron respects and complies with all laws and regulations in the U.S. and other countries where we operate." Western Digital did not comment.

In preparation for the U.S. crackdown, Huawei has stockpiled roughly six months to one year of key components, Nikkei reported last week.

Google, which provides the Android operating system for Huawei smartphones told Nikkei Asian Review in a statement that it was "complying" with the U.S. order, which will require it to seek licenses to continue business with Huawei. This means the Chinese company's smartphones could lose access to updated versions of popular applications such as Gmail and Google Maps.

However the U.S. company said "Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices." The blow to Huawei's overseas smartphone business comes just as the Chinese company has overtaken Apple to be the world's number two in the January-March period.

ST Microelectronics, another key European chipmaker, is set to have meetings this week to discuss whether it will continue shipping to Huawei, a source familiar with the plan told the Nikkei Asian Review. For now, ST Microelectronics is maintaining deliveries.

Huawei's key Asian chip supplier Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, also continues to deliver to Huawei but is conducting due diligence to assess the potential impact.

TSMC said on Friday the company owns a "complicated and sophisticated export control compliance system" and "based on the data in the system we are not changing our shipping practice for the time being," Nikkei has reported.

Other Asian suppliers such as Japan's Toshiba Memory, the world's second biggest NAND flash memory provider, and Japan Display, the screens supplier, told Nikkei they were investigating the implications for their businesses of the U.S. blacklist of Huawei.

Huawei's founder Ren Zhengfei told Japanese media on Saturday at company headquarters in Shenzhen that it would be "fine" even if Qualcomm and other American suppliers could not sell chips to Huawei. "We have already been preparing for this," Ren said in his first interview after U.S. restricted trade with his company last week.

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