The US Commerce Department issued Monday new rules expanding restrictions on Huawei, in a move that will further narrow the Chinese telecommunications equipment maker’s access to crucial chips.

Why it matters: The move could further close what some US officials call “loopholes” in Huawei’s chip supply chain, forcing non-US companies to apply for a license to sell chips made using American technology to Huawei.

  • The Trump administration has already banned US companies from shipping components and technology to Huawei, and cut it off from overseas semiconductor manufacturers that use American software and technology.
  • Monday’s new rules mean Huawei can’t circumvent the ban by purchasing commercially available chips it needs from third-party vendors.

Details: The US Commerce Department added another 38 Huawei subsidiaries into the so-called “Entity List” and imposed license requirements on any transactions involving items subject to US export controls, it said in a statement on Monday.

  • This means vendors of chips made with US technology will have to apply for a license in transactions where Huawei or other companies on the Entity List act as a “purchaser, intermediate, or end user,” according to the statement.
  • “These actions, effective immediately, prevent Huawei’s attempts to circumvent US export controls to obtain electronic components developed or produced using US technology,” the Commerce Department said in the statement.
  • The US President Donald Trump reinforced his concern that Huawei equipment could be used to spy on Americans. During an interview on Monday on “Fox & Friends,” Trump called the Chinese company “Spy-Wei.”
  • A representative of Huawei declined to comment to a request from TechNode on Tuesday.

Context: A series of US restrictions on critical chips has taken a toll on Huawei’s business, especially in the smartphone segment.

  • Chinese media Caixin reported earlier this month that Huawei will stop making its flagship Kirin chipsets after Sept. 15 due to US pressure on suppliers. 
  • Huawei’s high-end Mate 40 handsets, which will debut this fall, will be the last smartphones featuring the Kirin 9000 processor, company’s most advanced processor, said Yu Chengdong, head of Huawei’s consumer business, who called it a “huge loss” to the company, according to Caixin.
  • Huawei’s in-house chip designer Hisilicon relies on software from US companies such as Cadence Design Systems and Synopsys to design its chips. It outsources the production of its chip designs to Taiwan Semiconductor Manufacturing Company, but the collaboration is under pressure because of new US export regulations announced in May.
  • Mediatek, a Taiwanese chip designer, is widely seen as a possible alternative to Huawei’s Hisilicon. The company told Chinese business media Yicai Tuesday that it is evaluating the US export rule changes to make sure it complies with relative regulations.

Writing about semiconductors and telecommunications.