The Arm-Huawei Disconnect

Arm’s move to stop licensing its processor IP to HiSilicon, the captive chipmaker for Huawei, has set off a panic across the semiconductor industry. While the underlying threat to the entire chip industry is very real, many of the conclusions being drawn about this move are misleading or just plain wrong.

When the U.S. government blacklisted Huawei, it imposed export restrictions on shipping any IP developed in the U.S. to Huawei, or indirectly to Huawei through HiSilicon. Arm is a British company with a Japanese owner (Softbank), but much of its IP is developed in the United States. As a result, Arm has little choice but to comply with U.S. regulations. Even its Chinese subsidiary receives IP developed in the United States.

What this means for Huawei is very much dependent on how long this trade dispute lasts. Inside sources tell Semiconductor Engineering that Huawei, like many other large customers of IP companies, has been working with early versions of technology from a number of vendors. Sources say HiSilicon licensed Arm’s newest processor technology more than two years ago.

As a result, the short-term impact on Huawei/HiSilicon is negligible. Like many IP vendors, Arm develops a roadmap that is two to three years out, and it develops that IP in conjunction with partners such as HiSilicon. But if this dispute drags on for another couple of years, then it can cause problems for HiSilicon—unless HiSilicon comes up with another supplier of processor core technology to rival Arm’s.

The problem for Huawei is that all of the major processor cores are being at least partly developed in the United States. So while Arm has multiple design hubs in several different countries, with the largest in Cambridge, England, its No. 2 hub is in Austin, Texas. They’re not alone. Other developers of major cores are based in California. RISC-V came out of UC Berkeley. MIPS is owned by Wave Computing, which bought it from U.K.-based Imagination Technologies in 2017. SPARC is owned by Oracle.

Where things get fuzzy is around technical support. There are guidelines in place under the current restrictions involving what kinds of conversations are permitted, technical or otherwise.

All of this is very fluid, and a number of big chipmakers, IP and memory vendors do business with HiSilicon or Huawei and are therefore affected. Although a 90-day temporary license for Huawei is in place for some companies, it has no bearing on semiconductor IP. A statement issued by the Semiconductor Industry Association explains that it only pertains to parts for servicing of existing networks and handsets.

So what’s really going on? At issue, at least on the surface, is the levelness of the global technology business. China requires 51% Chinese ownership for companies to set up shop within its borders, and those companies must agree to share their IP with China. These rules have long rankled big tech companies outside of China, and raising tariffs to counter those measures was touted as a way to bring China to the bargaining table. That didn’t work.

Blacklisting Huawei and imposing export controls on companies doing business with Huawei/ HiSilicon ratchets up the tension between the U.S. and China by quite a few notches. And it is generating a fair amount of confusion, which doesn’t help matters.

If this dispute is resolved quickly, damage will be minimal. But it’s not just about Arm or other vendors doing business with Huawei. It’s about how this begins to ricochet across the supply chain, affecting multiple companies and the contracts they were expecting to provide revenue, and that includes foundries, equipment makers, materials suppliers and EDA vendors. This is a finely tuned supply chain, and even minor hiccups can be felt around the world.

When the U.S. stock market crashed in 1929, most people outside of Wall Street didn’t take much notice. They mistakenly believed the impact was confined to people who made bad investments. Two years later, the damage spread across the United States and into Europe, leading to a series of bad decisions such as tariffs and tightened money supplies that took decades to fix.

There are long tails to all of these events and decisions, and in China’s case the tail of the dragon is very long and very wide. The longer this drags on, the more dangerous that tail becomes.

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