https://finance.yahoo.com/news/huawei-troops-see-dire-threat-210000676.html

(Bloomberg) -- The Trump administration has fired multiple salvos against Huawei Technologies Co. since the start of a campaign to derail China’s technological ascendancy. The latest blow threatens to cripple the country’s tech champion.

Huawei’s leafy campus in southern China has been engulfed in a state of emergency since the Commerce Department in May banned the sale of any silicon made with U.S. know-how -- striking at the heart of its semiconductor apparatus and aspirations in fields from artificial intelligence to mobile services. Its stockpiles of certain self-designed chips essential to telecom equipment will run out by early 2021, according to people familiar with the matter.

Executives scurried between meetings in the days after the latest restrictions, according to one person who attended the discussions. But the company has so far failed to brainstorm a solution to the curbs, they added, asking not to be identified talking about private matters. While Huawei can buy off-the-shelf or commodity mobile chips from a third party like Samsung Electronics Co. or MediaTek Inc., it couldn’t possibly get enough and may have to make costly compromises on performance in basic products, they added.

What Huawei’s brass fears is that Washington, after a year of Entity List sanctions that’ve failed to significantly curtail the company’s rapid growth, has finally figured out how to quash its ambitions. The latest curbs are the culmination of a concerted assault against China’s largest tech company that began years ago, when the White House tried to cut off the flow of American software and circuitry; lobbied allies from the U.K. to Australia to banish its network gear; even persuaded Canadian police to lock up the founder’s daughter. The latest measures however are a more surgical strike leveled at HiSilicon, the secretive division created 16 years ago to drive research into cutting-edge fields like AI inference chips. That unit surged in prominence precisely because it’s viewed as a savior in an era of American containment, and its silicon now matches rivals’ like Qualcomm Inc.’s and powers many of Huawei’s products: the Kirin for phones, Ascend for AI and Kunpeng for servers.

Now that ambition is in doubt. Every chipmaker on the planet, from Taiwan Semiconductor Manufacturing Co. to China’s own Semiconductor Manufacturing International Corp., needs gear from American outfits like Applied Materials Inc. to fabricate chipsets. Should Washington get serious about throttling that spigot, Huawei won’t be able to get any of the advanced silicon it designs into the real world -- stymieing efforts to craft its own processors for mobile devices and radio frequency chips for 5G base stations, to name just two of the most vital in-house components. Dubbed the Foreign-Produced Direct Product Rule or DPR, Trump’s latest constraints have implications for China’s 5G rollout, for which Huawei is by far the dominant purveyor.

The ban “focuses on HiSilicon-designed chips, which present the biggest threat to the U.S.,” Jefferies analyst Edison Lee wrote in late May. “The DPR could quash HiSilicon and then Huawei’s ability to make 5G network gears.”

Read more: U.S.-China Fight Over Chip Kingpin Rattles Tech Industry

The scene at Huawei’s Shenzhen nerve center invokes deja vu from a year ago, when Huawei billionaire Ren Zhengfei emerged from seclusion to declare his company’s survival in doubt. In the months following that proclamation, two things happened. U.S. companies, spooked by the prospect of losing billions, lobbied Washington for exceptions to the Entity List and suppliers from Intel Corp. to Micron Technology Inc. relocated assembly to increase foreign-produced components and continue supplying the Chinese company. Huawei employees -- spurred on by patriotism given perceptions the nation was under attack -- went to 24-hour days to design alternatives to American parts.

The latest curbs could prove more effective because they remove Huawei’s chipmaker of choice from the equation. In theory, any chipmaker can petition the Commerce department for approval to ship Huawei-designed semiconductors, and opinion is divided on both sides of the Pacific as to how far the agency will allow shipments to proceed. But if it chooses to enforce the new curbs to the hilt, HiSilicon can no longer take its designs to TSMC or any foreign contract manufacturer....

“While there will be lots of opportunity to continue selling lesser quality chips to Huawei, this will be an additional challenge for the really good stuff,” he added.

(Read more at the link above)