US President Joe Biden’s administration is readying a US export rule used against Chinese telecommunications equipment maker Huawei Technologies that could curb Russia’s access to global electronics supplies if Russian President Vladimir Putin decides to invade Ukraine.
While it is unclear how the rule could impact Russia, the restrictions hobbled Huawei’s smartphone business.
Last month, the firm said it expected last year’s revenue to have fallen 30 percent and predicted continued challenges this year.
The US’ Foreign Direct Product Rule, as it is called, might be adapted to halt Russia’s ability to import smartphones, key aircraft and automobile components.
The administration is considering restricting chips and products with ICs bound for Russia, imposing its authority over items made abroad if they are designed with US software or technology, or produced using US equipment, a senior official said.
The scope of the rule against Russia has not been set, but US National Security Council officials have told executives of the Semiconductor Industry Association, a chip lobbying group, of possible unprecedented actions.
It is unclear whether the rule could have the kind of devastating effect on Russia that it has had on Huawei.
“A strict imposition of the Foreign Direct Product rule would significantly affect trade and output in Russia, though it’s hard to say by how much,” said Jeffrey Schott, an expert on international trade policy and economic sanctions at the Peterson Institute for International Economics.
The Foreign Direct Product Rule now restricts US and non-US firms from shipping items to Huawei that are the direct product of US technology or software.
Such shipments can only be made with a US license.
The rule was added to the curbs on Huawei after the firm was placed on an export control blacklist in 2019, but it did not stop the global flow of chips to the company.
The initial listing did not block overseas shipments to Huawei from firms such as Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker.
As a result, in 2020, the US added the Foreign Direct Product Rule to expand its authority to stop shipments of foreign-produced items to Huawei.
Companies like TSMC that use US chipmaking equipment are required to obtain US licenses before supplying Huawei and licenses for sophisticated chips are denied.
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