U.S. chipmakers are using a legal loophole to get around Trump's Huawei ban

What you need to know

  • In spite of a trade ban by the Trump administration, a few U.S. companies resumed selling components to Huawei three weeks ago.
  • Component sales to Huawei have reportedly totaled hundreds of millions of dollars in just three weeks.
  • The companies are "lawfully" getting around the Trump ban by not labeling the components as American-made.

U.S. chipmakers are continuing to sell products to Chinese smartphone and telecommunications equipment maker Huawei, despite a ban issued by the Trump administration last month, according to a new report from The New York Times.

Citing four people with knowledge of the sales, the report says U.S. chipmakers such as Intel and Micron have found a way to get around the trade ban by not labeling the products as American-made. Goods that are produced overseas by American companies are usually not considered to be American-made. The companies began shipping components to Huawei about three weeks back and will help the Chinese company to continue selling its products such as smartphones and servers.

Since a complete sales ban of components to Huawei is expected to come into effect after mid-August, it is possible that a certain percentage of the components shipped to Huawei could be for use in the company's future products. According to estimates, U.S. chipmakers have sold components worth hundreds of millions of dollars to Huawei already.

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Micron CEO Sanjay Mehrotra had mentioned during an earnings call on Tuesday afternoon that the company had ceased shipments to Huawei after it was put on the Entity List by the Commerce Department. However, Micron resumed sales two weeks ago after it reviewed the entity list rules and "determined that we could lawfully resume" shipping a few products.

The Trump administration, claims the report, has been aware of the sales but most officials are unsure about how they should respond. "As we have discussed with the U.S. government, it is now clear some items may be supplied to Huawei consistent with the entity list and applicable regulations," wrote John Neuffer, president of the Semiconductor Industry Association in a statement on Friday.

Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance.

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