Billions of dollars in tech revenue is at risk across Asia Pacific due to the latest U.S. restrictions on Chinese smartphone maker Huawei, the rating agency Standard and Poor’s said in a report this week.
President Donald Trump’s administration introduced a new rule in May That requires foreign companies that use U.S. chip-making equipment to obtain a U.S. license to sell certain semiconductors to Huawei or its affiliates. There is no indication that the United States grants those licenses. anytime.
For its part, Huawei needs those semiconductors to produce its smartphones and telecommunications equipment.
The U.S.-China confrontation puts about $ 25 billion in revenue at risk in S&P-rated Asia Pacific tech companies that do business with Huawei, according to S&P Global Ratings.
The new restrictions could affect as much as 15% to 20% of the revenue, or about $ 7 billion, of foundry companies such as Taiwan Semiconductor Manufacturing Co. and Semiconductor Manufacturing International Corporation, the world’s largest contract chip maker. from China.
Huawei, one of the world’s largest smartphone manufacturers and one of the leading manufacturers of telecommunications equipment, is in the midst of a fight between the United States and China for global technological dominance.
A man wearing a face mask uses his mobile phone while passing a Huawei store in Beijing on May 16, 2020.
Wang Zhao | AFP | fake pictures
Even before the new licensing rules in May, Huawei was included in the so-called “entity list” last year, which restricted American companies from doing business with the Chinese company without asking the government for permission. Washington says the technology company’s activities pose a risk to the national security and foreign policy interests of the United States.
Other companies in the region could experience a secondary blow to the tune of another $ 18 billion indirectly due to their exposure to companies that are in America’s blacklist along with Huawei, according to the S&P report.
“These expanded rules in particular affected chipset production companies (foundries) that use certain US technology or manufacturing equipment,” Clifford Kurz, credit analyst at S&P Global Ratings, said in a statement.
“Without a license from the US government, such companies will not be able to provide services directly to Huawei without facing restrictions,” he added.
Washington has accused Huawei of including security vulnerabilities in its hardware that could be used for espionage by Beijing. The United States has moved further to urge its allies to exclude the tech company from building its next generation of high-speed mobile Internet known as 5G. Huawei has denied the allegations that it conspires with Chinese intelligence.
“We anticipate operational turmoil as Asian and Pacific tech companies adjust to increased restrictions on Huawei’s access to US technology, however, the end effect of revenue and credit ratings may be moderate “S&P said.
For TSMC, it would be due to strong demand for chipsets that can offset the loss of Huawei’s orders, according to the report. Switching from Chinese customers to domestic suppliers will likely benefit SMIC, he added.
For its part, Beijing could intervene with possible financial and operational support for Huawei and other affected companies, while there may be some retaliatory measures that restrict the sale of US technologies in China, S&P said, adding the effect of that. In Asia Pacific, companies are likely to be minimal.
Tensions between the two economic powers escalated further last week, after China ordered the US consulate in Chengdu city to cease operations. That was in retaliation for Washington’s decision to close the Chinese consulate in Houston, Texas.
For its part, Huawei surpassed Samsung to become the world’s best smartphone player by shipping volume in the April-June quarter, according to research firm Canalys. Analysts have cast doubt on whether the Chinese tech giant will be able to maintain its lead, as most of Huawei’s sales in the second quarter come from China.
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