Trade war, Huawei ban to hit profits, growth outlook of US tech giants

Source:Global Times Published: 2019/8/19 19:33:40

Visitors check out the Huawei vendor at the 2018 Global Expo in the capital of Gaborone on August 6. Photo: Wang Cong/GT

The US blacklisting on Chinese telecommunications giant Huawei since May has hit the profits of US-based technology giants for which Huawei was a major customer and accelerated the decline of these enterprises.

The pressure will only drive their Chinese rivals to grow more quickly than expected, a veteran industry analyst said.

US chipmaker Broadcom estimated that the ban on Huawei will result in a loss of revenue of $2 billion per year, according media reports.

A wide range of other US public companies, including Qualcomm, Lattice Semiconductor, Microchip Technology, Inphi Corp and Qorvo,  said the ban directly affected their quarterly results, although none have revealed the size of that impact, industry website reported.

The harm could be huge - a Reuters estimate showed that Huawei spent around $70 billion on components last year, with around $11 billion of that going to US-based companies like Qualcomm, Intel Corp and Micron Technology.

Apart from Huawei's suppliers, US phonemaker Apple also felt the heat, as Chief Executive Tim Cook said that tariffs could hurt Apple, given that Samsung's products would not be subject to tariffs, according to a Reuters report on Monday.

Some of the company's products, including its popular AirPods and Apple Watch, will be subject to tariffs starting September 1, making it less competitive in the China market.

"US companies and the Trump administration have already panicked, as they found that extreme pressure could not kill Huawei, but only make it stronger and break the US global dominance and reduce US reliance at a faster pace," said Xiang Ligang, a Beijing-based industry analyst.

Huawei reported a robust first-half financial performance despite facing harsh sanctions from the Trump administration intended to destroy the global 5G leader. The company said that its revenue rose 23.2 percent year-on-year to 401.3 billion yuan ($58.3 billion), while net profit was up 8.7 percent.

Xiang noted that for the US companies, revenue losses are just short-term events. Worse is that their growth prospects may be hurt, as the crackdown has pushed Huawei to produce critical components and software that it previously relied on US companies like Qualcomm and Intel Corp to obtain.

The global supply chain has been disrupted and Huawei is set to intensify efforts to make breakthroughs in core technologies and reduce its reliance on US suppliers, experts said.

"If Huawei's self-developed Kirin chip is a blow to Qualcomm, as the company is reportedly studying computer chips as well, the next one that will feel the pinch would be Intel," Xiang noted.

Huawei's operating system HarmonyOS, which industry analysts said could help China's electronic information industry to break US domination in OS development, is also coming out, and this could be a potential rival to Google's Android.

If the US government's maximum pressure policy continues, it's possible that the US firms could only keep the market in the US in the end, Xiang said.
Newspaper headline: Trade war, Huawei ban to hit profits, outlook of US tech companies


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