US BIS adds 38 Huawei non-US affiliates to Entity List, removes Temporary General License, and expands Foreign-Produced Direct Product Rule (FDPR)

Mechanism

This final rule implements three simultaneous and mutually reinforcing measures under the Export Administration Regulations (EAR), all designed to close the supply-chain loopholes that had allowed Huawei and its global network of affiliates to access US-technology-derived inputs despite the original May 2019 Entity List designation (84 FR 22961).

1. Entity List expansion — 38 non-US Huawei affiliates

BIS added 38 Huawei non-US affiliates to Supplement No. 4 to 15 CFR Part 744 (the Entity List), all with a footnote 1 designation. Footnote 1 triggers the Huawei-specific FDPR: any foreign-produced item that is the direct product of US-origin technology or software, or that was produced by a plant or major component that is the direct product of US-origin technology or software, requires a BIS license to be exported to, reexported to, or transferred within a footnote 1 entity. The affiliates span multiple jurisdictions, including entities in Brazil, the United Kingdom, France, Germany, and across China — covering Huawei's global engineering, cloud, and distribution network. This followed BIS's prior expansion in May 2019 that designated Huawei Technologies Co., Ltd. itself and 68 US affiliates.

2. Temporary General License removal

The TGL, first issued in May 2019 when the original Entity List designation created immediate disruption to US carriers' network maintenance operations (many AT&T and T-Mobile rural networks ran on Huawei RAN equipment), had been extended multiple times (November 2019, April 2020, May 2020). The TGL expired on 13 August 2020; BIS replaced it with a narrower authorization covering only: continued support for existing US-market Huawei consumer devices (smartphones, tablets) receiving security patches; continued standards-body participation; and certain cybersecurity vulnerability disclosures. The network-operations and software-deployment authorizations were not renewed, effectively prohibiting US suppliers from maintaining existing Huawei infrastructure deployments without a specific license (presumption of denial).

3. FDPR expansion — closing the HiSilicon/design-house loophole

The most consequential element was the amendment to General Prohibition Three (§736.2(b)(3), reorganized to §734.9(e) in the February 2022 FDP reorganization rule). The pre-existing Huawei FDPR covered foreign-produced items being exported to Huawei entities. Huawei had structured around this by having HiSilicon (its fabless design subsidiary) commission chips from TSMC; as long as TSMC shipped directly to a non-Huawei entity (or as long as Huawei was not the named consignee), the FDPR was arguably not triggered.

The August 2020 amendment expanded the trigger in two directions:

• Production/development use: The FDPR now applies when a foreign-produced item *will be

used in the production or development* of any part, component, or equipment produced, purchased, or ordered by any footnote 1 entity. This captures TSMC chips destined for HiSilicon even when Huawei is the end-manufacturer rather than the direct importer.

• Party to transaction: The FDPR now applies when any footnote 1 entity *is a party to any

transaction* involving the foreign-produced item — regardless of whether that entity is the ultimate buyer. A Huawei subsidiary financing, arranging, or brokering a chipmaking transaction is now within scope.

On 14 September 2020, TSMC publicly confirmed it had ceased all new Huawei/HiSilicon orders, citing inability to comply with the expanded FDPR. This severed Huawei's access to leading-edge (7nm, 5nm) foundry capacity — the core design advantage of its Kirin mobile SoC and Ascend AI chip lines — with no qualified non-US foundry available at comparable process nodes at that time.

Downstream implications

• Huawei smartphone market share: Without access to advanced chips (Kirin 9000 series,

Tianfield), Huawei's 5G smartphone shipments collapsed from ~240M units in 2020 to ~35M by 2022. Its global mobile market share fell from ~19% to ~3%. The RAN business was more resilient short-term (uses older process nodes and inventory stockpiled pre-ban) but is structurally constrained for next-generation 5G-Advanced deployment.

• TSMC-Huawei revenue: Huawei/HiSilicon had been TSMC's largest customer (~14% of revenue

in 2020 H1). The ban represented an immediate ~USD 2B annual revenue gap for TSMC; redirected capacity was absorbed by Apple, AMD, NVIDIA.

• FDPR as template: The expanded "party to a transaction" and "production use" triggers became

the model for subsequent FDPR expansions — the Russia/Belarus FDP Rule (February 2022, §734.9(f)), the October 2022 advanced-computing FDPR (§734.9(h)), and the Iran UAV FDPR supplement (2023). The Huawei-specific rule at §734.9(e) (reorganized from §736.2 in February 2022) is now one of six enumerated FDPR variants in the EAR.

• Entity List footnote architecture: The "footnote 1" designation mechanism, first introduced

for Huawei in May 2019 and expanded here to 38 affiliates, became the standardized vehicle for extraterritorial FDPR triggers. SMIC received a footnote 1 designation in December 2020 (2020-12-22-us-bis-entity-list-smic-77-entities) applying a new SMIC-specific FDPR.

Open questions

• The 38 non-US affiliates include entities across Brazil, UK, France, Germany, and multiple

Chinese cities; whether HiSilicon Technologies Co., Ltd. was separately listed as a Huawei affiliate in this tranche or had already been captured under the original 2019 Huawei-entity umbrella.

• Long-term: whether SMIC can manufacture mature-node Huawei chips at scale (evidence from the

Mate 60 Pro in 2023 suggests SMIC 7nm-equivalent DUV lithography is possible for some SKUs, but at volumes constrained by DUV tool availability).

• The narrowed Temporary General License replacement was further clarified in the BIS Huawei

Entity List FAQ (updated December 3, 2020).