HONG KONG/BEIJING (reuters) – The latest AMERICAN broadside against Huawei, the Chinese company to export black list, threatens to rattle the global tech supply chain, work closely together with the $105 billion cases of the world’s top supplier of telecommunications equipment in the network.
The Trumpet administration has said that it would add Huawei Technologies and 70 stores to its “Entity List”, a move that likely will prohibit the company of the purchase of US components and technology, without the approval of the government, adding another incendiary element in the united states-China trade war.
The ban is not yet effective.
A similar U.S. ban on chinese ZTE Corp had almost crippled business for the smaller rival Huawei at the beginning of last year before the uprising was liquidated.
Such penalties Huawei, but probably have branches outside the company, analysts said.
It would interfere with Huawei’s business to a minimum, and all, but put it in an extreme, while its U.S. suppliers would also be hit, they said.
Of $70 billion Huawei spent for the purchase of parts in 2018, some $11 billion went to US companies, including Qualcomm, Intel Corp and Micron Technology Inc., and she could see that revenue disappear.
On the other hand, AMERICAN companies such as Apple faced with the risk of serious retaliation from China, an important market.
“This is very messy,” a China-based on a US-based tech company said.
It will be difficult for Huawei, the person said, noting none of the AMERICAN suppliers “can be replaced by Chinese ones, which are not within a few years, at least. Then they are already dead”.
The revenue for the company, also the world’s second-largest maker of smartphones, hit 721 billion yuan ($105 billion) last year, eight times ZTE and the half of the annual revenue of the South Korean Samsung Electronics Co.
But her activities have come under pressure over the past year, in view of the assembly of the international research, led by the U.S. accusations that the equipment can be used by Beijing for spying, concern the company has said is unfounded.
Huawei’s U.s. suppliers: tmsnrt.rs/2LO1Kxp
A variety of Asian and European suppliers, it would also hurt if Huawei was forced to curb production, while telecom providers that are dependent on Huawei, and have largely resisted AMERICAN calls to the company, would be left scrambling, just as countries in the race to roll out the next generation 5G mobile networks.
“Huawei is the manufacture of network servers, for example, because they are not able to get significant AMERICAN parts would mean that they also stop buying parts from other countries, not at all,” said an executive at a Huawei chip supplier.
“They can be relatively easier to manage component sourcing for mobile phones, because they have their own component companies for smartphones. But the server and the network, it is a different story,” said the producer.
According to brokerage Jefferies, the sanctions would mean that a “nightmare for China’s 5G”. The country, which is focused on a national roll out next year will most likely slow down the 5G pressure as a result, it added.
However, the industry participants pointed out that Huawei supplies components such as chips to alleviate interference.
Her first goal was the creation of inventories of six to nine months, and it has recently increased to 12 and, in some cases, 24 months, Jefferies said.
The shares in the Huawei suppliers fell in Asia on news of the U.S. black list.
South Korea Samsung fell by 2.4%, SK Hynix fell 3.5%, while China’s Luxshare Precision Industry fell as much as 6.1%. Shares in ZTE, also tumbled.
Huawei has said it is “ready and willing to deal with the AMERICAN government, and come up with effective measures to ensure the security of the product”.
The rotating President Eric Xu told Reuters in a recent interview that “in case of unforeseen events … we certainly have our contingency plan. What we have already is used in a number of our products on the Chinese market”.
Huawei has spearheaded China’s campaign for the development of its own high-end technologies for the reduction of the dependence on imports and such efforts have taken on urgency after the U.S. imposed sanctions on ZTE.
The ZTE case led to a number of “benefits” and “external pressures have developed into a internal drivers” in China, said Wan Gang, vice-chairman of China’s parliamentary advisory board.
The pain for the Huawei’s supply chain would be doubled if the trade war put a damper on the Chinese technology industry.
“The bigger concern would be U.S. allies who used to buy Huawei’s components may not continue of the companies with Huawei, out of fear of potential disruption of the United States,” said Doh Hyun-woo, an analyst at NH Investment & Securities in Seoul.
The Trumpet administration of the rhetoric in the direction of China were cool in the past few days after a new round of tariffs between the world’s top two economies and a selloff on the global stock markets.
The tensions escalated on Wednesday after the US President, Donald Trump signed an executive order barring American companies from the use of telecommunications equipment of companies deemed to pose a national security risk.
While the president of the order is not specifically the name of a country or company, U.S. officials have previously labeled Huawei a “threat”.
FILE PHOTO: Visitors walk along Huawei’s booth during the Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Eric Gaillard/File Photo
“The US seems to have already decided to nail Huawei down,” said the China-based US-based tech company source.
“The problem is that, because there does not seem to be a prospect for a trade agreement in the near future, the U.S. accelerated the process of the killing of Huawei.”
(Story refiled to change the headline)
Reporting by Sijia Jiang in Hong Kong, Josh Horwitz in Shanghai, Ju-min Park and Heekyong Yang in Seoul and Michael Martina and Cate Cadell in Beijing, Makiko Yamazaki in Tokyo; Writing by Miyoung Kim; Editing by with the ipad has Himani