The U.S. is reportedly preparing to block global chip supplies to Huawei

What you need to know

• The Trump administration could soon begin restricting global supply of mobile chips to Huawei.
• The proposed rule change will require all foreign companies using U.S. chipmaking equipment to obtain a U.S. license before supplying chips to Huawei.
• If the proposed rule change is finalized, it could potentially devastate Huawei's smartphone business.

Last month, a report from Reuters had revealed that the Trump administration was mulling changing U.S. regulations to cut Huawei off from global chip suppliers such as TSMC. Now, an exclusive new report from Reuters claims senior officials in the Trump administration have agreed to go ahead with the proposed rule change.

Under the proposed rule change, all foreign companies that make use of American chipmaking equipment will need to get a license from the U.S. before they can supply certain chips to Huawei. As per sources familiar with the matter, the rule change is primarily aimed at blocking sales of chips to Huawei by TSMC, which happens to be a major producer of chips for the Chinese company's HiSilicon subsidiary.

HiSilicon's Kirin 990 5G chipset, which powers the Mate 30 and P40 series phones, is produced using TSMC's 7nm+ EUV process. Almost all major chipmakers, including TSMC, use equipment made by U.S. companies. Currently, at least, there is no production line in China that uses equipment made exclusively in China.

What still remains to be seen is if the rule change will be signed off by President Donald Trump, who did not appear very keen on the proposal last month. If the rule change is finalized, however, it could end up hurting not just Huawei's smartphone business but also U.S. companies that supply chips to the Chinese firm.