A report this week stated that Chinese smartphone maker Huawei is in danger of billions of dollars of revenue in the Asia Pacific region following recent United States sanctions from rating agency Standard & Poor’s.
President Donald Trump’s administration introduced a new rule in May Foreign companies using US chipmaking devices are required to obtain a US license to sell certain semiconductors to Huawei or its affiliates. There is no indication that the US will approve those licenses. anytime soon.
For its part, Huawei needs those semiconductors to produce its smartphones and telecommunications devices.
According to S-P Global Ratings, the US-China confrontation by Asia Pacific technology companies traded by S&P is at risk of about $ 25 billion.
The new restrictions could affect 15% to 20% income, or about $ 7 billion in foundry companies, such as Taiwan’s Semiconductor Manufacturing Company and Semiconductor Manufacturing International Corporation – China’s largest contract chipmaker.
Huawei – one of the world’s largest smartphone makers and a top telecommunications equipment manufacturer – is in the midst of a fight between the United States and China for global technological dominance.
On May 16, 2020, a man wearing a face mask uses his mobile phone as he walks outside the Huawei store in Beijing.
Wang Zhao | AFP | Getty Images
Even before the new licensing rules in May, Huawei was placed on the so-called “entity list” last year, which banned American firms from doing business with a Chinese firm without obtaining permission from the government. Washington says tech company activities threaten US national security and foreign policy interests
Other companies in the region may experience a secondary hit indirectly to another hit of $ 18 billion due to exposure to those firms. According to the S&P report, America was blacklisted with Huawei.
Clifford Kurz, a credit analyst at S&P Global Ratings, said in a statement, “These use expanded regulations, particularly in the hit chipset production (foundries) companies that use certain US technology or manufacturing equipment.”
“Without a US government license, such companies would be unable to deliver services directly to Huawei without facing sanctions,” he said.
Washington has accused Huawei of incorporating security vulnerabilities into its hardware that could be used by Beijing to spy. The US has urged its allies to stop making their next generation high-speed mobile Internet, called 5G. Huawei has denied allegations of confrontation with Chinese intelligence.
S&P said, “We anticipate Asia-Pacific tech firms’ operating turmoil, as Huawei has restrictions on access to US technology, but the final revenue and credit rating effects may be moderate.”
For TSMC, this would be due to strong demand for chipsets that could compensate for the loss of Huawei’s orders, the report said. SMIC will benefit from a shift of Chinese customers to domestic suppliers.
For its part, Beijing may step in with potential financial and operational support for Huawei and other affected companies, while China may have some retaliatory measures prohibiting the sale of US technologies, S&P said. Add effect Asia Pacific firms will be least likely to.
Tensions between the two economic powerhouses increased further last week after China ordered the US consulate in Chengdu to cease operations. He was in retaliation for Washington’s decision to close China’s consulate in Houston, Texas.
According to research firm Canalys, Huawei surpassed Samsung to become the top smartphone player in the world by shipment volume in the April-June quarter. Analysts have doubted whether the Chinese tech giant will be able to lead it, as most of Huawei’s sales in the second quarter were from China.