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(Bloomberg) -- The Commerce Department announced further restrictions on Huawei Technologies Co. aimed at cutting the Chinese company’s access to commercially available chips, the latest move in an increasingly tense relationship between the world’s two biggest economies.
The changes, which the department announced in a written statement on Monday, build on restrictions announced in May, adding 38 Huawei affiliates in 21 countries to an economic blacklist as the U.S. seeks to limit adoption of the company’s 5G technology.
“We don’t want their equipment in the United States because they spy on us,” President Donald Trump said Monday in an interview on “Fox and Friends.”
The move is the latest tit-for-tat in escalating tensions between Washington and Beijing over everything from the origins of the Covid-19 pandemic to China’s increasingly tight grip over Hong Kong. Despite the U.S. decision, Commerce Secretary Wilbur Ross said on Fox Business that talks with China continue on various levels.
The restrictions are likely to further hit both Huawei’s 5G base stations and smartphone businesses because it relies heavily on foreign chips to make those, further denting China’s ambition to play a key role in global rollout of 5G technology. Huawei’s stockpiles of certain self-designed chips essential to telecom equipment will run out by early 2021.
Nokia Oyj and Ericsson AB stand to benefit from Huawei’s further faltering in its 5G prowess, while domestic smartphone rivals including Xiaomi, Oppo and Vivo are likely to get a bigger pie of the Chinese market.
Ross said the action was aimed at closing loopholes the company explored after previous U.S. actions. Secretary of State Michael Pompeo praised the move as a “direct blow” against the Chinese Communist Party.
Shares of Huawei suppliers dropped sharply in Taiwan Tuesday morning after the U.S. announced the new curbs.
A Huawei spokesperson said Tuesday that the company was still reviewing the impact internally and that it had no immediate comment. China’s Foreign Ministry didn’t immediately reply to a request for comment sent via WeChat.
Huawei has long rejected accusations that its technology can be used to spy on foreign nations or companies.
All chip companies working for Huawei, no matter where they are, will be subject to licenses, a Commercial official said, adding that even foreign companies will be affected as long as they use U.S. design software and equipment.
That means major Asian and European chip companies such as MediaTek Inc., Samsung Electronics Co., NXP Semiconductors NV, and STMicroelectronics NV may need a license to continue shipping to Huawei, though the official declined to name any specific company.