Huawei ban clouds U.S.-china trade relations, tech sector

WASHINGTON/BEIJING (Reuters) – A U.S. bid to block China’s Huawei Technologies to buy vital American technology threw in the question of the sale of a number of the biggest tech companies and drew a sharp rebuke on Thursday from Beijing, which warned it can be harmful for trade negotiations.

A Huawei logo is seen at an exhibition during the World Intelligence Congress in Tianjin, China-May 16, 2019. REUTERS/Jason Lee

Shares of Huawei’s U.S. suppliers fell on the fear of the Chinese company would be forced to stop buying Us chips, software and other components after the Trumpet administration are prohibited from the purchase of AMERICAN technology without special permission.

Huawei, the world’s largest telecom equipment maker, said that losing access to the AMERICAN suppliers “will do significant economic damage for Us companies” and the effect on the “tens of thousands of American jobs.”

“Huawei will seek their salvation immediately a solution for this issue,” the company said in a statement.

The U.S. Secretary of Commerce Wilbur Ross told Bloomberg the order on the black list of places Huawei is going in on Friday.

The U.S. patents, announced on Wednesday, was the last shot fired on a U.S.-China trade war, which is rattling financial markets and threatening to derail of a slowing global economy.

Chinese officials have said that Washington’s aggressive stance can have an effect on the trade talks, which seemed to have reached a deadlock in the past week in the United States hiked tariffs on Chinese goods, and Beijing retaliated with higher tariffs on AMERICAN products.

Ministry of commerce spokesman Gao Feng stressed that the United States should avoid further damage of Sino-U.S. trade relations. “China will take all necessary measures to resolutely protect the legitimate rights of Chinese companies,” Gao told reporters.

China’s Ministry of Foreign affairs also announced the formal arrest of two Canadian citizens who were detained shortly after Canada arrested Huawei Chief Financial Officer Meng Wanzhou in December.

Mix faces extradition to the United States on charges that they conspired to defraud global banks about Huawei’s relationship with a company that active in Iran. They and the company denies the allegations.

While Canada says China has no specific link between the arrest of the two men and Mix the arrest of experts and ex-diplomats say they have no doubt it is their business to press Canada.


The Ministry of Commerce said on Wednesday it is adding Huawei and affiliates on the “Entity List,” which bars to buy components and technology from U.S. companies without the approval of the government.

Lawmakers in the U.S. Congress have long feared that Huawei equipment could be used by the Chinese government to spy on the Americans. Democrats and Republicans prepared to support the Trump administration move.

Republican Senator Marco Rubio said companies should reconsider entering into long-term contracts with Huawei, mentions in a tweet that “very soon Huawei will lose access to important components such as chips, antennas & phone operating systems.”

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Rubio added that Huawei there are “real questions now about how they can survive.”

Leading analysts downgraded their assessments for various microchip companies in the wake of the move against Huawei, which was the world’s third-biggest buyer of semiconductors last year.

Huawei was the world’s third largest buyer of semiconductors last year, accounting for 4.4% of the global market share, behind only Samsung and Apple, according to Gartner.

Susquehanna Financial Group analyst Christopher Rolland said he believed Huawei had built up a one-to two-year supply of AMERICAN components, and noted that “this is what Huawei was scared!” Rolland cut price targets on several microchip companies, including Xilinx Inc.

Shares of Xilinx fell by 5.7 percent in the beginning of the afternoon on Thursday, while rival chipmaker Qualcomm Inc. fell 3.6 percent. They were the biggest drag on the Philadelphia SE Semiconductor Index.

Optical component maker NeoPhotonics Corp was the biggest loser, with its shares fall 16.3%.

Analog Devices and Finisar Corp decreased by approximately 2.5%, while Skyworks Solutions shed 4.8%, Qorvo was a decrease of 5.9%, with a laser-sensor maker Lumentum Investments decreased by 9%, and the memory chipmaker Micron Technology lost 2.7%.

There are also increasing signs of the U.S.-China trade war would filter into the broader economy.

Walmart Inc. said prices for shoppers will increase as a result of higher tariffs on Chinese goods, even as the world’s largest retailer, reported on Thursday its best comparable store sales growth in the first quarter in nine years.

Walmart Chief Financial Officer Brett Biggs told Reuters that the company will seek to ease the pain, by trying to buy from other countries.


If the negotiations in the direction of the resolve of the working class to a halt last week, the United States increases the pressure by increasing the tariffs on a list of 200 billion dollars worth of Chinese imports to 25% from 10%.

China, which views the U.S. decision last year to impose tariffs, such as the genesis of the trade, war, revenge this week with a higher excise duty on a revised list of $60 billion in AMERICAN products.

President Donald Trump, who has embraced protectionism and accused China of engaging in unfair trade practices, has threatened, 25% of the rates at another $300 billion of Chinese goods.

With few options left for the levying of import duties on AMERICAN goods, China, may choose other ways to the pressure from the United States, including the blocking of corporate mergers and other deals.

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“There are other things they can do, and M&A would definitely be a thing,” said Stacy Rasgon, an analyst at Bernstein.

While the United States wants significant changes in China’s approach to intellectual property rights and state subsidies as part of a trade agreement, Beijing is insisting that all tariffs be eliminated.

The two sides are also at odds over how many more U.S. goods, China would have to agree to buy it and how balanced the text of the draft of trade agreement should be, Vice-Premier Liu He, China’s lead trade negotiator, said last week.

Reporting by Yawen Chen and Se-Young Lee and Diane Bartz; Additional reporting by David Shepardson in Washington, Stephen Nellis and Noel Randewich; in San Francisco, and Arjun Panchadar in Bengaluru; Writing by Chris Sanders and Paul Commented; Editing by Sonya Hepinstall

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