From September 15th the Chinese telecoms giant will no longer be able to buy vital semiconductorsHUAWEI IS ON the ropes. From midnight on September 14th the Chinese technology giant will be cut off from essential supplies of semiconductors. Without chips it cannot make the smartphones or mobile-network gear on which its business depends. America’s latest rules, finalised on August 17th, prohibit companies worldwide from selling chips to Huawei if they have been made with American chipmaking kit. American semiconductor companies, for which Huawei has been a lucrative customer, have implored their government to extend the deadline, as have their industry bodies. A full reprieve looks unlikely.Huawei now looks likely to follow one of three paths. The first involves Washington granting licences to suppliers so that they can sell chips to the firm in a limited fashion. This would let Huawei stay in business—just about. MediaTek, a Taiwanese chipmaker that is one of its main suppliers, has petitioned America’s Department of Commerce (DoC) for such a permit. To keep Huawei’s edge blunt, suppliers keen to produce chips designed by its in-house semiconductor unit, HiSilicon, are unlikely to be issued such dispensation.Even a debilitated Huawei may not satisfy America. The DoC’s default setting is to deny permits. That would force the Chinese firm to take more desperate action, such as making its own chips using older technology that could be sourced from supply chains that do not include American firms. Pierre Ferragu of New Street Research, a telecoms-and-technology research firm, expects Huawei to do this within 12 months.This path has just become rockier. On September 4th Reuters reported that America’s Department of Defence has proposed putting Semiconductor Manufacturing International Corporation (SMIC), China’s leading chipmaker, on the same blacklist as Huawei. The Pentagon alleges that SMIC works with China’s armed forces, and so poses a threat to national security. A blacklisting would destroy SMIC’s business, which relies on American machine tools. Its share price fell by almost a quarter on the news. SMIC denies having military ties and said it is in “complete shock”. The threat of such action may dissuade SMIC from teaming up with HiSilicon, as Huawei might have hoped.This leaves the third eventuality. Huawei may go bust, or be forced to sell off bits of its business. This would not happen immediately: at the end of 2019 it had cash reserves of 371bn yuan ($53bn), enough to cover operating costs for a year and a half. But if push comes to shove, it may offload HiSilicon. Huawei’s chip-design arm is one of the most advanced such outfits in the world. According to IC Insights, a firm of analysts, HiSilicon broke into the global top-ten design companies by revenue in the first half of 2020, the first Chinese firm to do so. Since it will no longer be able to design chips for its owner after September 14th, HiSilicon could profitably focus on doing so for third parties in China. That would generate a new revenue stream for Huawei. If instead
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