The company will not only be locked out of Google's software ecosystem but also lose the ability to develop its own ARM-based chips.
The Trump administration softened its stance slightly this week by granting the firm a license to buy USA goods until August 19 to minimize disruption for customers. That's why Arm is complying with the ruling.
In the immediate aftermath, we've already seen Google suspend some of its business with Huawei, including working with them on future Android updates and device certifications. In addition, it can no longer buy essential components used in its hardware from the chipmakers.
The triple blow will raise the pressure on Huawei after President Trump banned American companies from selling goods or services to the Chinese group. Huawei denies those accusations, and the US has so far been unable to provide evidence of its claims. He said it would greatly affect the firm's ability to develop its own chips, many of which are now built with ARM's underlying technology, for which it pays a licence.
"ARM is the foundation of Huawei's smartphone chip designs, so this is an insurmountable obstacle for Huawei", said Geoff Blaber, from CCS Insight.
Marc Allera, chief executive of EE, told the paper the company had "paused" the launch of Huawei's 5G phones because the Chinese tech company did not have the "surety of service" it needed to offer long-term contracts.
According to a spokesman for ARM, "ARM is complying with the latest restrictions set forth by the USA government and is having ongoing conversations with the appropriate USA government agencies to ensure we remain compliant". "We don't want to do this but we will forced to do that because of the USA government", he told CNBC. "Arm values its relationship with our longtime partner HiSilicon and we are hopeful for a swift resolution on this matter".
"We are confident this regrettable situation can be resolved and our priority remains to continue to deliver world-class technology and products to our customers around the world", the spokesperson said. The ban, however, is valid for ARM China as well. Additionally, the Android operating system is designed for ARM-based processors, so in combination with Google's revocation of Huawei's Android license, the company will have an even more hard time providing a user interface for its devices.
Leading smartphone analysts have warned the United States measures may cripple Huawei's smartphone business outside China. ARM's designs form the basis of most mobile device processors worldwide. Huawei is one of the few phone makers that doesn't use Qualcomm's Snapdragon chips in its phones.
The immediacy of impact on Huawei's day-to-day operations is unclear, for a variety of reasons. However, a significant chunk of the supplies does not belong to the USA and Huawei can make necessary adjustments to fix the situation, a spokesperson told Bloomberg.
The US government's restrictions made Google decide to discontinue partnership with Huawei. Interestingly, the USA is temporarily easing limits so Huawei's activities in the country will not be totally disrupted. It started with Google, and now United Kingdom based ARM has also revoked business with Huawei or its subsidiaries.