WASHINGTON — The Trump administration issued new rules Friday that will bar Huawei and its suppliers from using American technology and software, a significant escalation in its battle with the Chinese telecom giant and one that will likely inflame tensions with Beijing.
The rule changes will prevent companies from selling chips to Huawei that are made with American manufacturing equipment, or based on designs that are the product of American software and technology, the Commerce Department said. Companies can apply for a license to continue supplying products to Huawei, but the administration said the presumption will be to deny those requests.
The move could inflict further damage on Huawei, which continues to rely on American-made machinery and software designs to make the chips for its smartphones and tablets.
The measure comes on top of several restrictions taken against Huawei in the last year. The administration added the Chinese telecom giant to an “entity list” last May, barring exports of American products to Huawei and 114 of its affiliates unless suppliers had first obtained a license.
But Huawei has continued to use American software and technology to make its own semiconductors, as well as purchase them from foreign foundries that use American equipment, “undermining the national security and foreign policy purposes of the entity list,” the Commerce Department said Friday.
“Despite the entity list actions the department took last year, Huawei and its foreign affiliates have stepped up efforts to undermine these national security-based restrictions through an indigenization effort,” Commerce Secretary Wilbur Ross said. “However, that effort is still dependent on U.S. technologies. This is not how a responsible global corporate citizen behaves.”
The new rule expands U.S. restrictions to include semiconductor designs that are the product of American software and technology, as well as chip sets made outside the United States with American equipment.
The move comes at a moment of heightened tensions between the United States and China. President Trump has blamed China for not doing enough to stop the spread of the coronavirus and has suggested the United States may punish the Chinese government. Mr. Trump has begun threatening to scrap the trade deal the two countries signed in January.
The new measure, which will affect one of China’s biggest technology companies and a crown-jewel of Chinese innovation, could also elicit damaging retaliation from Beijing aimed at American technology companies that depend on sales to China, such as Qualcomm and Apple.
On Friday evening, the English edition of the Chinese state-controlled newspaper Global Times cited an unnamed source who said that the Chinese government was ready to retaliate against the new U.S. moves against Huawei. Among the countermeasures under consideration, according to Global Times, are new restrictions against American companies including Apple, Cisco and Qualcomm, and suspension of aircraft purchases from Boeing.
“Based on what I know, if the U.S. further blocks key technology supply to Huawei, China will activate the ‘unreliable entity list,’ restrict or investigate U.S. companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes,” Hu Xijin, the editor in chief of the Global Times, wrote on Twitter.
Industry executives said they were still waiting to analyze the full text of the rule, but suggested it could have sweeping implications not just for Huawei, but for other companies around the world.
Under the new rule, any foreign company that uses American technology to produce microchips would need a license to sell to Huawei. That makes it difficult for major chip contract manufacturers like Taiwan’s T.S.M.C. to sell to Huawei, because its supply chains rely heavily on American manufacturing tools. It could also clamp down on sales by makers of semiconductor equipment, like Applied Materials and KLA, and chip design software companies like Cadence.
The move came shortly after an announcement Thursday night that T.S.M.C. had agreed to build a $12 billion manufacturing facility in Arizona, in a response to the Trump administration’s growing concerns about the security of the global electronics supply chain.
Also on Friday morning, the Commerce Department extended for another 90 days a license that has allowed American companies to continue doing business with Huawei temporarily. It warned this would be the final extension.
Paul Mozur and Raymond Zhong contributed reporting.