Chip designer ARM has suspended business with Huawei.

It is a move that could lead to severe problems for the Chinese telecom company.

This move threatens Huawei's ability to create its own chips.

Instructed to halt dealings

BBC News reported that ARM employees have been instructed to halt “all active contracts, support entitlements, and any pending engagements” with Huawei due to the US trade ban.

ARM is UK based

The US has banned any US companies from doing business with the Chinese telecom giant without permission from the American government.

ARM is based in the UK and owned by the Japanese SoftBank group, but it is concerned it is affected by the US ban.

An internal memo reportedly revealed that its chip designs include “US origin technology”.

ARM could be placed under the US restrictions as it develops some processor designs in Austin, Texas and San Jose, California.

Huawei relies on ARM chips

Huawei relies on ARM for chip architecture designs for its own Kirin processors.

It pays to license these.

Without the licenses, Huawei will not be able to continue manufacturing its own processors using ARM designs and its HiSilicon fabless semiconductor company.

ARM is complying, it said

ARM said in a statement it is complying with the latest restrictions set forth by the US government.

It is having ongoing conversations with the appropriate US government agencies to ensure they remain compliant.

“ARM values its relationship with our longtime partner HiSilicon and we are hopeful for a swift resolution on this matter,” it said.

Huawei calls move "politically motivated"

A Huawei spokesperson told The Verge it recognises the pressure some of its partners are under, "as a result of politically motivated decisions".

Without ARM’s architecture designs or instruction sets, Huawei faces a nearly impossible task of manufacturing a smartphone without US technology inside.

Precedent setting

ARM could be reacting cautiously to the US Commerce Department order, or it has been advised to halt business with Huawei directly.

ARM’s decision could set a precedent for other semiconductor companies that also supply Huawei.

Huawei has reportedly stockpiled enough US-made parts to last three months to a year.

But that stockpile will run out.

Huawei currently relies on US-based manufacturers like Micron, Skyworks, and Qorvo that supply storage and networking components for some of Huawei’s phones.