New U.S. curbs to slam Huawei, hurt suppliers in short term
Ramped-up U.S. restrictions on Huawei are likely to choke the Chinese company's access to even off-the-shelf chips, threaten its crown as the world's largest smartphone maker and disrupt global tech supply, executives and experts warned.
The Trump administration on Monday expanded its curbs on
Huawei and banned suppliers from selling chips made using U.S. technology to
the firm without a special licence - closing potential loopholes in its May
sanctions that could have let Huawei access the tech via third parties.
The curbs underscore the rift in Sino-U.S. ties, their worst
in decades, as Washington presses governments to squeeze Huawei out, alleging
the firm would hand over data to Beijing for spying. Huawei denies it spies for
China.
The tech giant's business has suffered since America first
blacklisted it a year ago.
If Huawei cannot source chipsets as a result of the expanded
curbs, its "handset business will likely disappear", Jefferies said
in a note.
Other brokerages, including JP Morgan, echoed the view,
adding this would give players such as Xiaomi 1810.HK and Apple AAPL.O an
opportunity to increase their market share.
Huawei did not respond to requests for a comment.
Earlier this month, Huawei flagged it would stop making its
flagship Kirin chipsets from September because U.S. pressure on its suppliers
had made it impossible for its HiSilicon division to keep making the chipsets
that are key components in mobile phones.
Huawei's HiSilicon division has relied on software from U.S.
companies such as Synopsys SNPS.O to design its chips. It outsourced the
production to Taiwanese contract chipmaker TSMC 2330.TW TSM.N, which uses
equipment from U.S. companies.
IMPACT ON CHIP SUPPLIERS
The U.S. ban comes as a setback for chip suppliers too, at
least in the near term, as they have to apply for licences that comply with the
new rules, experts said.
It is yet unclear how many suppliers require these licences
and whether they will get them.
In Asia, memory chipmakers including South Korea's Samsung
Electronics 005930.KS and SK Hynix 000660.KS, Japanese image sensor maker Sony 6758.T
and Taiwanese chipset maker MediaTek 2454.TW may be affected, a chip industry
source said.
Shares in MediaTek, which counts Huawei as a major customer,
slumped 10% on Tuesday.
MediaTek said it was monitoring new developments of rules to
remain in compliance, but that it did not expect material impact to near-term
operations, based on available information.
Samsung, Hynix, and Sony declined to comment on the curbs.
WINNERS
Several questions remain about the how the new curbs will be
implemented, and how hawkish a stance America plans to take.
For example, a semiconductor vendor would "potentially
be required to know where all its products end up so they do not engage in any
transaction where a Huawei affiliate might be a purchaser, intermediate
consignee, ultimate consignee or end-user", political risk consultant
Eurasia Group said in a note.
But there are likely to be some winners in the longer term
if Huawei is forced to relinquish its spot as the world's largest smartphone
maker.
"Huawei currently has 45-50% market share in China and,
if this becomes vulnerable, Xiaomi, along with Oppo and Vivo, are likely to be
the biggest beneficiaries," JP Morgan analyst Gokul Hariharan said,
referring to Chinese smartphone makers.
"Huawei would also be likely to lose further ground in
the international smartphone space and 5G base stations, both of which could
benefit Samsung. The Apple food chain could also benefit from potential iPhone
share gains."
TSMC, which has said it will not ship wafers to Huawei after
Sept. 15, will be hurt very limitedly in the long run, Bernstein said in a
note. "TSMC is "everybody's foundry" eventually."
The ban is also likely to affect U.S. chipmakers such as
Qualcomm QCOM.O, but those losses are likely to be offset in the longer term as
Huawei's rivals gain ground, analysts said.
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