The impact of the Trump administration’s threats to choke Huawei Technologies Co. reverberated across the global supply chain on Monday, hitting some of the biggest component-makers.
Chipmakers including Intel Corp., Qualcomm Inc., Xilinx Inc. and Broadcom Inc. have told their employees they will not supply Huawei until further notice, according to people familiar with their actions. Alphabet Inc.’s Google cut off the supply of hardware and some software services to the Chinese mobile phone equipment giant, another person familiar said, asking not to be identified discussing private matters.
The Trump administration on Friday blacklisted Huawei — which it accuses of aiding Beijing in espionage — and threatened to cut it off from the U.S. software and semiconductors it needs to make its products. The ban, which had been anticipated, hamstrings the world’s largest provider of networking gear and No. 2 smartphone vendor.
Blocking the sale to Huawei of critical components could also disrupt the businesses of American chip giants like Micron Technology Inc. and retard the rollout of critical 5G wireless networks worldwide — including in China. That in turn could hurt U.S. companies that are increasingly reliant on the world’s second largest economy for growth.
Impact of Huawei’s Ban across US and Europe
If fully implemented, the Trump administration action could have ripple effects across the global semiconductor industry. Intel is the main supplier of server chips to the Chinese company, Qualcomm provides it with processors and modems for many of its smartphones, Xilinx sells programmable chips used in networking and Broadcom is a supplier of switching chips, another key component in some types of networking machinery. Representatives for the chipmakers declined to comment.
Intel, which gets less than 1% of its revenue from Huawei according to Bloomberg supply chain data, fell 2% in New York Monday as the market opened. Qualcomm, which gets about 2.6% of its revenue from Huawei, fell 4.8%. Lumentum Holdings Inc. cut its fourth-quarter forecast and said it has discontinued all shipments to Huawei, which accounts for about 18% of its sales. Its shares fell 3.7%. Broadcom, with 5.3 percent revenue exposure to Huawei, was down 4.4% percent.
In Europe, the impact of the ban was also being felt, though companies there are only restricted from supplying research or products made in the U.S. Germany’s Infineon Technologies AG fell as much as 6 percent after the Nikkei reported it halted shipments to the Chinese company in the wake of the U.S. ban. Shares of STMicroelectronics NV and Austrian-based AMS AG were also hit.
An Infineon spokesman said that the majority of products it delivers to Huawei are not subject to U.S. restrictions, adding that the chipmaker can “make adaptions in our international supply chain.” AMS also said that it had not suspended shipments to Huawei.
Huawei “is heavily dependent on U.S. semiconductor products and would be seriously crippled without supply of key U.S. components,” said Ryan Koontz, an analyst with Rosenblatt Securities Inc. The U.S. ban “may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers.”
Morgan Stanley analysts wrote Monday that semiconductor investors should reduce their positions, with a prolonged re-escalation of U.S.-China trade tensions not yet discounted by the U.S. equity market.
Huawei’s $500 million bond due 2027 was indicated 0.3 cents on the dollar lower at 93.8 cents at 2 p.m. in Hong Kong, according to Bloomberg-compiled prices. That’s after it posted a record drop of 2.4 cents on Friday.
The ban’s commencement also walloped shares of Asian tech supply chain companies Monday. Sunny Optical Technology Group Co. was again the worst performer on Hong Kong’s Hang Seng Index, while Luxshare Precision Industry Co. dived as much as 9.8% in Shenzhen.
Source: Bloomberg
