Earlier this week the trade war between China and the United States escalated, the US government this round targeted Huawei; US companies are no longer allowed to trade with the telecom specialist. ARM now also will halt cooperating with the manufacturer.

The British ARM Holdings has stated in a memo to its employees that it will immediately end all relationships with Huawei (and therefore with HiSilicon). According to the BBC, an analyst has concluded that this decision will "have a major impact on Huawei's chip-making capabilities," because many of these chips were made based on ARM's architecture.

-- BBC -- 

UK-based chip designer ARM has told staff it must suspend business with Huawei, according to internal documents obtained by the BBC. ARM instructed employees to halt "all active contracts, support entitlements, and any pending engagements” with Huawei and its subsidiaries to comply with a recent US trade clampdown. ARM's designs form the basis of most mobile device processors worldwide. In a company memo, it said its designs contained “US origin technology”. As a consequence, it believes it is affected by the Trump administration's ban. One analyst described the move, if it became long-term, as an “insurmountable” blow to Huawei’s business. He said it would greatly affect the firm's ability to develop its own chips, many of which are currently built with ARM’s underlying technology, for which it pays a licence. These are used in the Chinese company's 5G base stations and computer servers in addition to its smartphones. Cambridge-headquartered ARM had been described as the UK's largest tech firm until its takeover by a Japanese fund. It employs 6,000 workers and lists eight offices in the US.

On Monday 20 May, US government officials issued a 90-day reprieve on some of the restrictions in order to minimise immediate disruption. But ARM believes that the temporary licence involved does not apply to it. A spokesman for ARM declined to offer any additional clarity about the current status of its Huawei contracts.

"ARM is the foundation of Huawei’s smartphone chip designs, so this is an insurmountable obstacle for Huawei,” said Geoff Blaber, from CCS Insight.

"That said, with an abundance of companies in Huawei’s supply chain already having taken action to comply with the US order, Huawei’s ability to operate was already severely affected.”

What is not yet clear is whether ARM is acting on its own interpretation of the US rules, or whether it has been advised by the Commerce Department.

"If that interpretation is correct, that’s going to affect every semiconductor company in the world,” remarked analyst Lee Ratliff, from IHS Markit.

"They’re not going to be able to easily replace these parts with new, in-house designs - the semiconductor industry in China is nascent.”

ARM No Longer In Business With Huawei Either