Monday, May 20, 2019
Major U.S. tech companies are taking the next step in the U.S.-China trade war, refusing to supply parts and technology to Chinese telecom giant Huawei. Intel (INTC - Free Report) , Qualcomm (QCOM - Free Report) and Alphabet (GOOGL - Free Report) are declining shipments of computer chips and component’s to Huawei, which has become President Trump’s latest flashpoint in the U.S.-China trade war.
Last week, the president took action against Huawei by executive order, citing “national security concerns” that require harsh action against the global telecom major. We saw last December that Huawei’s CFO, the daughter of the company’s CEO, was arrested in Canada at the request of U.S. authorities, and is currently under house arrest in Vancouver, British Columbia. She continues to fight extradition to the U.S.
In 2018, Huawei bought around $11 billion in supplies from U.S. tech firms. Plans for the current year included 5G technological development on a global scale, including the U.S. In fact, U.S. broadband companies in rural areas have grown dependent on Huawei equipment and services, which have carried inexpensive price-points relative to competition. This crackdown on Huawei is likely to bring broadband rollout to swaths of American hinterland to a crawl.
This squeeze on Huawei does apparently have a pronounced affect on Chinese technology overall —chip supplies are largely developed by countries outside China, which reportedly produces just 3% of the chips its countries use. Investing in more of its own parts production woulds take considerable investments and, perhaps more importantly, time. Depending on how long the current trade war draws out, however, the more likely it is China would put forth attempts to go it alone in the tech supply sector.
Eurozone markets did not like this latest development, with indexes trading into the red. Pre-market futures are down notably a half-hour before today’s opening bell. Other tech suppliers, such as Xilinx (XLNX - Free Report) and Micron (MU - Free Report) , are also trading down in early market activity.
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