• Monday, May 27, 2024
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How new proposed US restrictions on chip-making equipment will affect Africa

Huawei grabs 2 awards at Nigeria’s top ICT awards

Some senior officials in the Trump administration have agreed to new measures to restrict the
global supply of chips-making equipment to Huawei Technologies, at a time when the COVID-19 pandemic impacts economic growth around the world.

Under the proposed rule change, foreign companies that use U.S. chip-making equipment would
be required to obtain a U.S. license before supplying certain chips to Huawei.

Analysts say the proposed change of trade rules will backfire on U.S. companies as the latter will
develop their own supply chain. A report by the Boston Consulting Group states further
escalation in U.S. export control to Huawei will result in and end the leadership of the U.S. in
semiconductor and will consequently decouple the US and Chinese technology industries.

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Driving Force of Development

The semiconductor industry is widely recognized as a key driver and technology enabler for the
whole electronics value chain. With expanding tech industry and deepening innovation culture,
Africa has proved its potential to be a competitive force in technology in the future. How this
unilaterally proposed a change of rules by the U.S. would hurt Africa’s fast-growing technology

In 2019, the global market for semiconductors was projected to shrink by 12 per cent due to growing economic uncertainties from the U.S.-China trade war. This year’s COVID-19 pandemic is further shaking up the global semiconductor industry. A new IDC report says the semiconductor industry will fall by 6 per cent.

The proposed move by some U.S. officials will create more uncertainties in the global industry of
semiconductors, the centrepiece of ICTs that transform society for the better.

These technologies which enable new technologies like artificial intelligence, 5G, and the Internet
of Things, have been playing a critical role in Africa’s social-economic development. When the
COVID-19 pandemic is behind us, ICTs and the digital economy will also play a crucial role in
economic recovery.

Not Allowed to Cook in your own kitchen with an American pan

If we look closely at the proposed change of rules, we can see that it aims for imposing
restrictions on the use of equipment that has already been sold. This will severely undermine the
basic principles of international trade. The post-sale rules change will ultimately erode trust in
the global supply chain, nullifying established norms and regulations overnight. Needless to say,
Africa will also be the victim.

The global semiconductor value chain has taken decades to build. Semiconductor modules are
highly interdependent, and no company or country can build up a comprehensive supply chain
on their own.

If these new rules were to take effect, even if merely one piece of US-origin equipment, say a
screwdriver purchased from the US years ago was used at any step in the production of chips,
chipmakers outside of the US would have to seek approval from the US government.

By way of example, this is equivalent to say one could not be allowed to make a face mask during
the coronavirus pandemic because a pair of American scissors are used in the mask production
line. This situation will further deteriorate the already hard-hit global economy when we are in
urgent need for an open, collaborative, and stable global value chain.

Africa’s Share in Semiconductor

According to a report by Deloitte, the global semiconductor industry is set to continue its robust
growth well into the next decade due to emerging technologies such as autonomous driving,
artificial intelligence (AI), 5G and Internet of Things, coupled with consistent spending on R&D
and competition among key players.

The global semiconductor sector market offers Africa opportunities not to be missed. With a
massive growth in technology hubs across the continent-growing over 50 per cent in the last several
years, Africa needs to have a share in the global semiconductors industry, to secure its
competitiveness in the future.

Edison Xie, Director of Media Affairs, Huawei Southern Africa Region