Samsung Will Stop Supplying Chips to Huawei Due to US Sanctions

Huawei recently lost its supply of smartphone chips from TSMC and now it is about to lose Samsung’s support as well, a South Korean news outlet reported on Tuesday. Samsung and another memory chip manufacturer SK Hynix will be forced to suspend business with the Chinese tech giant on September 15 as part of the new restrictions placed by the US Commerce Department.

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These restrictions prohibit non-American companies from doing business with Huawei that involves technology or equipment developed in the US. These restrictions have already affected Huawei’s business severely. The upcoming Huawei Mate 40 series will be the last to feature high-end Kirin chipsets, and experts believe that Huawei will be replaced by Apple and Samsung in the flagship smartphone business in the future.

This ban will hurt Samsung and SK Hynix just as much as Huawei. According to estimates, nearly 40% of SK Hynix’s revenue comes from China.

Huawei has tried to remedy it by sourcing components from SMIC, which is China’s leading chip foundry. However, reports suggest that President Donald Trump’s administration will not let it remain a viable option for long amid the ongoing trade war with China. Earlier this month, the US Defence Department announced that it might add the Chinese chipmaker to the entity list that bans them from doing business with American companies. This will stop the chipmaker from producing equipment required by Huawei.

Even if it manages to avoid the ban, SMIC’s currently technology lags behind that of TSMC, so it will be a while before it can produce high-end chips for Huawei.

The best-case scenario for Huawei right now is if it can continue purchasing high-end chips from Samsung or some other top dog in the future.