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Update, February 20 2020 (3AM ET): The US Commerce Department is reportedly considering a proposal that would essentially choke off Huawei’s supply of chipsets from chipmakers like TSMC. Now, US President Donald Trump has seemingly come out in opposition to this measure.

“Things have been put on my desk that have nothing to do with national security, including chipmakers,” Trump was quoted as saying by Reuters. The newswire said this was a response to a proposal that would allow the US to block chipmakers from supplying Huawei if they used US equipment.

Read: Huawei’s Google Mobile Services replacement is finally nearing wider launch

The comments suggest that the President isn’t in favor of clamping down on Huawei’s supply of processors. We can’t say we disagree either, as mobile phone chipsets (for phones that aren’t sold in the US to boot) don’t seem to pose a threat to national security.

This certainly gives us hope that the proposal to go after Huawei’s chip partners isn’t adopted. It also gives us hope that the US government will grant Google a license to offer Google Play Services to Huawei. After all, Google Play Services don’t have anything to do with national security either.

Original article, February 18 2020 (4:47AM ET): The US has already taken away Google services from new Huawei phones by implementing a trade ban against the company. This ensured Huawei couldn’t launch devices like the Mate 30 series in as many markets as it would have liked.

Huawei still pressed on and managed to have a good 2019 in terms of sales. However, It looks like the US is not done inflicting sanctions on the Chinese firm.

According to Reuters, the Trump administration is mulling a regulation change that would restrict Huawei’s access to smartphone chipsets. The proposal aims to sever the company’s business relationship with chipmakers like Taiwan’s TSMC, one of Huawei’s main chip suppliers.

How can the US cut off chip supplies?

The proposal would allow the government to force firms using US chip-making equipment to get a US license before they can supply Huawei. This means Washington can dictate licensing terms for the technology or completely block the issuing of licenses.

Reuters reports that the new restriction is among several other options that the US government is exploring. These will be reportedly discussed at high-level meetings this week and the next.

The chipset proposal has been drafted already, a source told Reuters. However, there’s no certainty about its approval just yet.

“What they’re trying to do is make sure that no chips go to Huawei that they can possibly control,” a second source said.

The US Commerce Department declined to comment on the development. Reuters was also unable to get an official response from Huawei or TSMC.

Although, an unnamed Commerce spokesperson said that the recent US charges against Huawei “reaffirm the need for caution in considering license applications.” The spokesperson added that the US still has “major concerns about Huawei.”

Possible repercussions

Losing access to chipsets or even a disruption in their supply chain could lend a big blow to Huawei. Possibly even bigger than the loss of Google services on its phones. Why? Because most chipset foundries use US-made equipment.

“There is no production line in China that uses only equipment made in China, so it is very difficult to make any chipsets without US equipment,” noted a report from China’s Everbright Securities.

Keeping this in mind, the possible impact of such a move could actually crush Huawei’s smartphone business. Right now, it’s unclear what exact terms the US can dictate on chipset manufacturers if the regulation is adopted, but we sincerely hope it doesn’t come to that.