The Trump administration has ramped up pressure on the Chinese Communist Party by forging closer political and business ties with Taiwanese technology firms, while at the same time working to undermine Chinese tech giant Huawei, according to a report.
Taiwan Semiconductor Manufacturing Company, or TSMC, said last week it would build a factory in Arizona, a move praised by Secretary of State Mike Pompeo as he and President Trump move to decouple the American tech industry from China’s.
A day later, the Department of Commerce announced a rule change that could hurt Huawei by limiting the business it does with TSMC, The New York Times reported Tuesday.
The moves are seen as a challenge to China’s trade relationship with Taiwan, a democracy that the Chinese Communist Party claims is a renegade province, as well as a show of support for Taiwan’s independence.
The Trump administration appears determined to be “hitting at targets that are both economically and politically sensitive for Beijing,” Eswar Prasad, a professor at Cornell University, told The Times.
The Chinese Communist Party’s Ministry of Commerce condemned the US move against Huawei, saying it would continue to protect the interests of Chinese businesses.
The Commerce Department rule change bars global companies from using American technology to produce or design chips that are sent directly or through third parties to Huawei.
But it apparently does not stop them from producing chips that would be sent to Huawei’s customers or partners, including manufacturers that assemble phones and other devices for Huawei.
The rule could force the company and its suppliers to reorganize their operations, and the US could toughen the rule to close that loophole and others that may emerge.
“The future of at least a major portion of Huawei’s business is now firmly in the hands of the Commerce Department,” Paul Triolo, a technology policy analyst at Eurasia Group, told the paper.
Commerce Secretary Wilbur Ross wrote in an email to the paper that the department would punish intermediaries and front companies that ignore the regulations.
“Any collusion with Huawei or its affiliates to willfully violate this rule is prohibited, and any party found to be in violation will be barred from further access to US equipment or software,” Ross said.
Huawei has been preparing for the chance it could be cut off from major suppliers, stockpiling $23.5 billion worth of products, components and raw materials, according to its annual report, an increase of nearly 75 percent from 2018.
The move comes as Trump, Pompeo and others in the administration have ratcheted up their criticism of China’s response to the coronavirus pandemic, which has killed more than 90,000 Americans, and which Trump has increasingly blamed on China.
Meanwhile, the tech website MacRumors reported that production of Apple’s over-ear headphones will enter mass production in mid 2020, and that suppliers Goertek and Luxshare would assemble at least a portion of the headphones in Vietnam.
The move appears to be part of a trend in which companies are moving operations elsewhere in Asia to avoid the coronavirus and negative effects of the US-China trade war on China’s economy.