Ongoing trade tensions and a technology cold war between the US and China may spur a “de-Americanization” of global supply chains, according to a report by global trade nonprofit Hinrich Foundation.

Why it matters: US export restrictions on major Chinese tech companies such as Huawei will force global semiconductor companies to source non-American parts, causing a reconfiguration of supply chains to meet thresholds set by the US government, according to the report.

  • To ship to companies on the US commerce department’s Entity List, suppliers around the world must ensure their products contain less than 10% of US technology if they are made in the US and 25% for non-US made products.
  • China is currently the largest importer of integrated circuits in the world with $300 billion worth of microchip technology being imported to the country in 2018, said the report.

Details: The methods by which global suppliers legally circumvent export controls by moving parts of the value chain to workable locations will determine whether the US trade restrictions have the desired effect, Alexander Capri, research fellow at Hong Kong-based Hinrich Foundation and author of the report, told TechNode.

  • “Efforts to circumvent US export controls will increase” unless export restrictions on core technologies are lowered or removed altogether, the report said, though “the semiconductor industry is taking a wait-and-see posture regarding large-scale reshoring operations” for the moment.
  • Huawei has more than 13,000 suppliers globally and it purchased some $70 billion in components and parts in 2018, according to the report, citing company rotating chairman Ken Hu.
  • Huawei’s legal team began an analysis to determine whether the company could legally circumvent US export controls by instructing its suppliers to lower American technology in its value chain when the company was placed on the US government’s Restricted Entities List in 2018.
  • In order to meet de minimis exclusion, semiconductor companies would either have to reduce the value of the US content or increase the value of non-US made components, according to the report.

Context: The Trump administration placed Huawei on a trade blacklist in May, effectively barring the Chinese telecommunications equipment maker from buying US components and technology without government approval.

  • The US government added to the trade black list in Oct. 28 other entities including Chinese government agencies and private companies, such as video surveillance gear maker Hikvision and artificial intelligence firms SenseTime and Megvii.

Wei Sheng

Wei Sheng is a Beijing-based reporter covering hardware, smartphone, and telecommunications, along with regulations and policies related to the China tech scene. Before joining TechNode, he wrote about...

Leave a comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.