HSINCHU, Taiwan/TAIPEI -- The world's largest contract chipmaker has insisted it can continue delivering critical semiconductors to Huawei Technologies without triggering penalties from Washington's crackdown on the use of U.S. technology to supply the Chinese tech giant.
Taiwan Semiconductor Manufacturing Co. became the first of Huawei's major suppliers to define the scale of its exposure to the new U.S. constraints, after taking advice from a leading U.S. law firm, which it declined to name.
TSMC said at a technology symposium on Thursday that while intellectual property and materials used for semiconductor development would be subject to U.S. restrictions on sales to Huawei, chipmaking equipment would not fall under the new rules. As a result, the chips would not breach rules requiring a license for sales to the Chinese company of products containing 25% or more U.S. technology.
Toshiba also said Thursday that it has resumed all shipments of electronic parts to Huawei. It did not say exactly what products it supplies to the Chinese company, but the list likely includes large-scale integration chips used to process large amounts of data at once.
The company had previously suspended certain shipments, but has now concluded that they do not violate restrictions imposed by the U.S.
Panasonic will continue shipping products that do not violate U.S. restrictions to Huawei. Chinese computer maker Lenovo Group will maintain its transactions with Huawei as well.
The news will give a big boost to Huawei, which has in recent days seen a number of suppliers including U.S. search giant Google, UK-based chip designer Arm Holdings, and Germany's Infineon halt certain deliveries and services for fear of violating the new rules. A number of telecom operators in Europe and Asia have also announced they will not sell Huawei's new smartphones due uncertainty over access to Google's Android operating system.
The serial announcements have raised questions over Huawei's ability to maintain its position as the world's largest telecom equipment supplier and the second-largest smartphone maker. The Chinese company has said it began preparing a backup plan several months ago -- stockpiling inventory and expanding capacity with alternative suppliers -- which is now being implemented.
Yet Washington's surprise move to place Huawei on the so-called Entity List -- which restricts exports of products incorporating U.S. technology -- has left suppliers struggling to assess whether they are at risk of penalties. Many have voiced uncertainty over how to define what percentage of a product's content is accounted for by the manufacturing equipment, the intellectual property, and materials and components.
TSMC said that after expert legal advice it was confident that its sales to Huawei did not cross the 25% threshold, and shipments to the Chinese company -- its second-largest customer, after Apple -- would continue.
The finding that semiconductor-manufacturing equipment is excluded from the content rules will be closely examined by other key semiconductor suppliers such as Japan's Sony and Toshiba and South Korea's SK Hynix.
The heart of all electronics devices, semiconductors are central to the trade battle between the U.S. and China. Though Huawei has its own chip design arm, HiSilicon Technologies, the Chinese tech giant still relies heavily on foreign chip suppliers to support its products. China's own semiconductor industry is not yet advanced enough to provide the complex chips required for mass production of new-generation products.
Meanwhile many suppliers at TSMC's technology conference were still stunned by the scale of the U.S. crackdown on Huawei, soon after trade talks between Washington and Beijing collapsed in early May. The trade tensions and action against Huawei could exacerbate the already painful semiconductor downturn, several told the Nikkei Asian Review.
"We really don't know so far how the Huawei affair will impact the whole industry," David Zhang, CEO of China's Goodix, the world's biggest fingerprint sensor chip developer and a key supplier to Huawei smartphones, told reporters on Thursday. "The issue is so complicated and it's not clear how this will develop. ... We are still monitoring that."
Elizabeth Sun, TSMC's spokesperson, also warned the campaign against Huawei would be felt across the industry. "Over the past years, the global semiconductor industry has built a complex and interconnected supply chain. If there is a disruption in the supply chain, there is definitely an impact. As to how big, we don't have enough clarity to make an assessment now."
Suppliers said they feared accidentally violating the U.S. trade law. "Everything is up in the air now, no one knows what will happen tomorrow," a chip industry executive said.
"It's basically the U.S. showing its muscles to the whole world, that America is still the big boss. But the whole supply chain could brace for collateral damages as everything is very connected," another chip industry manager said.
Huawei did not respond to a request for comment.
Nikkei staff writer Jada Nagumo in Tokyo contributed to this article.
