The continued fallout of U.S. actions banning U.S. suppliers with doing business with specific China based high tech manufacturers is continuing to escalate. On Friday, the U.S. Commerce Department escalated efforts to limit U.S. high tech component suppliers from doing business with suspect Chinese high-tech manufacturers. New export restrictions were imposed on five major supercomputer firms resident in China. This move follows the action to ban suppliers from doing business with Huawei Technologies.

The companies targeted with restrictions from any U.S. supply include three affiliates of Sugon of Beijing and Wuxi Jiangnan Institute of Computing Technology. U.S. semiconductor suppliers including Advanced Micro Devices, Intel and Nvidia have been noted as suppliers. With such advanced technology suppliers having a high profile of China based customers, the monetary and supply network impacts remain of concern.

As Supply Chain Matters has noted in prior high-tech industry supply chain commentary, such escalating actions, each surrounding the escalating trade war involving the U.S. and China, portend a weaponization of supply networks, restricting access to advanced technology in order to protect domestic advanced technology IP.

The Wall Street Journal reported that in addition to expanding the restricted entity listing, the Commerce Department has cut in-half the number of licenses for U.S. technology companies that assign Chinese nationals to advanced engineering projects, many of which involve semiconductor and telecommunication technology development. According to the report, licenses that were approved in weeks are now extended to response times of rom six to eight months.

While these escalating actions will impact Chinese tech companies in the short-term, industry experts warn that they are likely to escalate resolve toward Chinese internal efforts in developing homegrown advanced technology.

With U.S. President Donald Trump and Chinese President Xi Jinping scheduled to meet at the scheduled G-20 meeting in Japan next week, the stakes for somehow resolving the increasing escalation of actions are quite large. Regardless of potential actions coming from this summit, the signs of increased trade tensions that snare high-tech supply and customer demand networks are likely to continue.

We previously noted Bloomberg’s citing of a senior fellow at the Business School of National University of Singapore as bluntly indicating: “Long-held relationships between supplier networks and global ecosystems will fall apart. Markets will fragment, and there will be a decoupling of China and the U.S. into two distinct tech supply chains.”

This is indeed shaping out to be an advanced technology conflict being played out by two very influential economies, and existing high-tech supply networks are now in the crosshairs as to the implications.

 

© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.