Samsung, SK Hynix will reportedly stop selling chips to Huawei

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Huawei set to layoff US workers at subsidiary, Futurewei Technologies

Times just keep getting tougher for Huawei. According to several Korean news outlets and The Verge, tech giants Samsung and SK Hynix will reportedly stop selling chips to Huawei starting September 15.

The decision comes amid increasing pressure from the U.S. government to cut ties with the Chinese firm.

Ending sales to Huawei will likely hurt all parties involved, but Huawei certainly has the most to lose. In August, the firm said that it is running out of processor chips due to the U.S. sanctions. As of this month, it will no longer be able to make its own Kirin chipsets.

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Pressure Catching Up

The latest set of U.S. sanctions was introduced in August to complement previously-made rulings. They ban non-American companies from selling components developed with U.S. technology unless they have a special permit to do so.

Huawei depends on a variety of chipmakers to supply it with the components it needs to crank out various gadgets. The strategy has been successful so far. It recently became the world’s top-selling smartphone manufacturer. That being said, the firm won’t be able to hold that title for long if it can’t source new components.

On the flip side, Huawei’s size makes it an attractive client for chipmakers. That has led firms like MediaTek to seek a license to continue selling chips to Huawei. Last month, Qualcomm did the same thing, asking the U.S. government for approval to sell its components to Huawei.

Not all firms are taking the same approach. Samsung and SK Hynix aren’t the only companies planning to stop selling to Huawei amid the economic pressures. Taiwanese chipmaker TSMC reportedly suspended its sales to the Chinese firm in May.

In response to the various sanctions, the Chinese government funded a domestic semiconductor company called SMIC. Its future remains murky as the U.S. government has threatened to levy new sanctions against the chipmaker.

Regardless, Huawei’s options are dwindling.

Market Mover

With few other options, Huawei has been aggressively buying as much inventory as possible. Ahead of next week’s sanctions, the Chinese firm’s spending spree has driven up the price of DRAM components. Chip suppliers have enjoyed large profits in the first half of the year as a result.

However, the semiconductor industry will feel the pain of Huawei’s blacklisting after the new sanctions go into effect on September 15. Memory chip prices will likely drop in response. Meanwhile, suppliers like Samsung and SK Hynix will need to find new buyers for their components.

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