Intel is a chip manufacturing company based in the United States. It is the biggest semiconductor chip company in the world. AMD (Advanced Micro Devices) is also a company that manufactures laptop chips, computer processors, and other technologies for its consumers. These two companies have a lot in common, and one of them is that they were both given license to supply chips to Huawei.
Reasons Behind the United State’s Huawei Ban
Huawei is a Chinese technology company that is into the production, design, and distribution of telecommunication devices. However, this company depends a lot on American firms like Intel, AMD, and others for computer chips, processors, and other components. Recently, the US government banned the supply of these components to Huawei. They got banned because, over the years, the US government has been accusing Chinese companies, including Huawei, of espionage and disloyalty in business.
Also, there is an ongoing trade war between America and China. American businesses in China are suffering, and vice versa. The US government increased the tariffs on Chinese imports by 25 percent while China government revoked their commitment to stop enforcing technology IP transfers on American businesses. This war contributed to the US government’s decision to ban American companies from doing business with China firms, and Huawei was one of the companies significantly affected by this ban.
Impact of the ban on American companies
The ban did not just affect Huawei and other Chinese companies, but it also harmed the American companies associated with them. This ban meant that as these businesses in China will not be receiving products from America, the American suppliers will be losing clients and income, too.
Estimated revenue loss for some American companies are;
- Advanced Micro Devices(AMD) – $39 million (2% of its total revenue)
- Intel corporation – $85 million (1% of its revenue)
Intel and AMD License to Supply Huawei
The American government enforced the ban starting from September 15. However, these companies realized the loss they would incur and decided to file for a permit to supply Huawei regardless. On September 21, Intel and AMD became the first chip companies to announce their license to continue supplying laptop chips to the technology company, Huawei. Other companies that applied include;
- Micron Technology (MU: NASDAQ)
- SMIC (00981:HK)
- TSMC (TSM: NYSE)
Because of this license, Huawei and its sub-brand, Honour, can now expect to get specific chips from these two companies. This will enable them to continue in the production of their famous MateBook and MagicBook Pro laptops.
Huawei depends on chips produced by American companies like Intel, AMD, and TSMC. The chips produced by these companies are more powerful than the ones they produce locally. Although this ban would have significantly affected both parties involved, the permission granted Intel and AMD would benefit them both in the end.