Huawei’s plans to ramp up production of its own silicon chips have been derailed after the UK chip designer Arm said it would stop licensing its essential technology to the Chinese company.

The Cambridge-based company, which is owned by Japan’s SoftBank, said it was forced to cease sharing its technology with Huawei to comply with a US banning order, issued last week.

The step is a big setback for the Chinese telecoms equipment maker which was dealt a series of blows on Tuesday when four large mobile operators in Japan and the UK pulled planned launches of new Huawei smartphones due to the US banning order.

While Arm is not a US company, its designs include intellectual property from a number of US companies that it has bought, including the $931m purchase in 2004 of Artisan, a US chip company. Arm said its designs contained “US origin technology”, making them subject to the export controls.

Huawei had planned to increase production of its own chips after the news of the ban, which has cut it off from microprocessors made by Qualcomm and Intel, among others. Huawei’s chip design unit HiSilicon employs 7,000 people and has produced a range of smartphone chips, many of which are manufactured by TSMC in Taiwan. But these designs rely heavily on Arm’s technology.

“There really isn’t anybody out there who does what Arm does. The time to create a working processor from scratch, particularly of the complexity of Arm processors, is measured in years and hundreds of millions of dollars,” said Scott Hover-Smoot, general counsel at chipmaker Graphcore, who has worked in the semiconductor industry for the past 25 years, including at TSMC.

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“For Huawei to come up with an alternative is not going to be cheap, easy or fast. But they have known for two or three years they’ve been under investigation by the US government and these are some of the brightest people in the world. I’m confident they have a plan B in place,” he added.

In February, Arm’s chief executive, Simon Segars, defended his company’s work with Huawei, telling reporters that Huawei’s chip designs had become “very sophisticated” and that its design team was now “world class.”

“Our relationship there is with the chip design team at Huawei. We’ve had a relationship with them for a long time, been producing chips for their handsets and been innovating quite strongly,” he said. “Obviously we are subject to any export control either from the UK . . . the US . . . but right now we are continuing to work with HiSilicon.”

Huawei confirmed it had been informed over the weekend that Arm would stop doing business with it. The company’s Kirin 980 chipset is built on Arm designs but will not be affected for about a year, it estimated.

This month, the Financial Times reported that Huawei was building a 400-person chip research and development factory outside Cambridge, just a 15-minute drive from the headquarters of Arm Holdings. The two companies were reported to be working closely on innovation.

A Huawei spokesperson said: “We value our close relationships with our partners, but recognise the pressure some of them are under as a result of politically motivated decisions. 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.”

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Via Financial Times