The U.S. Department of Commerce has revoked certain export licenses for Intel and Qualcomm, barring the chipmakers from selling consumer-related items to a Chinese customer, a move that is expected to impact Intel's second-quarter revenue. The decision, which comes amid increased scrutiny of China's leading technology firm Huawei Technologies, highlights the Biden administration's efforts to curb the sale of U.S. technology to the Shenzhen-based company.
In a filing with the Securities and Exchange Commission on Wednesday, Intel disclosed that the Commerce Department was revoking export licenses for its consumer-related items to a customer in China, without naming the specific customer. However, Reuters reported on Tuesday that the U.S. has revoked licenses that allowed companies, including Intel and Qualcomm, to ship chips used for laptops and handsets to sanctioned Chinese telecoms equipment maker Huawei Technologies.
Despite the revenue hit, Intel stated that it still expects its second-quarter revenue to remain within the range of $12.5 billion to $13.5 billion, albeit below the midpoint. The announcement led to a 2% drop in Intel's shares during premarket trading.
The move to restrict sales of U.S. technology to Huawei has been seen as a victory for both American officials concerned about China's rapidly advancing technology and the rivals of the affected companies, such as Advanced Micro Devices (AMD). AMD and other skeptics of Intel's business relationship with Huawei have reportedly tried to stop Intel from selling its chips to the Chinese firm, arguing that Intel's license was unfair because AMD had not received its own license to sell advanced chips to Huawei, despite attempts to secure one from the Biden administration.
Intel's license to sell to Huawei was initially issued by the Trump administration in September 2020, after the Chinese company was placed on a trade blacklist along with more than 275 other Chinese firms the previous year. American companies are prohibited from selling to companies on the list without special permission.
In recent months, some Republican lawmakers have been pressuring the Biden administration to take a more aggressive stance on China, particularly regarding Huawei's advancements. The Chinese company heavily relies on Intel's chips to power its laptops, with more than 90% of Huawei's sales during the first half of 2023 containing Intel's processors, according to a Reuters report in March.
Sen. Marco Rubio, a Florida Republican, praised the decision to revoke the licenses, stating, "This was the right decision, but the license never should have been granted in the first place."
Qualcomm, which has been selling 4G chips to Huawei since receiving a license in 2020, also licenses its portfolio of 5G technologies to the Chinese firm. The deal between Qualcomm and Huawei is set to expire in early fiscal-year 2025, and the companies have already begun negotiations to renew the agreement, as per a recent regulatory filing.
Earlier this month, Qualcomm acknowledged that it expects its operations to be impacted by competitors, including Huawei, developing their own chips. Huawei began using a 5G chip designed by its HiSilicon unit last year, although the manufacturing of this chip has drawn intense scrutiny and allegations of violating U.S. sanctions.
In the regulatory filing, Qualcomm stated, "While we have continued to sell integrated circuit products to Huawei under our licenses, we do not expect to receive product revenues from Huawei beyond the current calendar year."
