Progress on Huawei ban
On May 16, the United States banned American companies from supplying or transferring technology deemed critical for national security to Chinese telecom equipment supplier Huawei. The ban also stopped US companies from buying products from Huawei. Most US companies complied with the ban and stopped their transactions with Huawei until further notice.
This move had a significant impact on the global telecom industry, as Huawei is the world’s largest network gear supplier and second largest smartphone maker. It is also at the forefront of the 5G rollout. The Huawei ban hit the US semiconductor companies the hardest, as it is one of their core customers. 33 of the 92 core suppliers of Huawei are American. Last year, Huawei spent $11 billion of its $70 billion procurement budget on US companies.
US chip companies stop supplies to Huawei
Google suddenly rescinded Huawei’s Android license, which means the latter’s new smartphones cannot access Google Play Services or the Play Store, putting Huawei out of the Android smartphone market. A Bloomberg report stated that US chip companies Intel, Qualcomm, Broadcom, Xilinx, and Qorvo and memory chip makers Micron and Western Digital also stopped supplying chips to Huawei. Microsoft has not yet stated whether it will comply with the ban, but it is likely to follow its peers and stop supplying to Huawei.
Top US telecom carriers AT&T, Verizon, T-Mobile US, and Sprint stopped buying from Huawei. Optical and photonic supplier Lumentum also halted shipments to Huawei and lowered its earnings guidance for the June 2019 quarter.
Europe may join US suppliers
The Nikkei Asian Review reported that Europe might follow the United States and stop doing business with Huawei. Infineon has already stopped its shipments to Huawei, and ST Microelectronics is discussing whether to continue shipments to Huawei.
The compliance with the ban pulled down stocks of Huawei chip suppliers, sending the VanEck Vectors Semiconductor ETF (SMH) and the iShares PHLX Semiconductor ETF (SOXX) down more than 3% at the start of May 20 trading. The two ETFs are close to their 200-day moving average.
If the ban continues, it could significantly impact Huawei’s business, slow down US chip sales, and potentially disrupt the global rollout of 5G wireless networks.
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