New restrictions on Chinese firm Huawei threaten to put more pressure on certain areas of the global tech economy, including some U.S. chip makers who continue to lobby for some lenience on this corner of Sino-U.S. trade, or at least some special exceptions.
The U.S. Commerce Department is announcing that Huawei will need a license to obtain semiconductors under new trade restrictions that will also impact 38 Huawei affiliates in 21 countries around the world. Saying the Chinese company took “evasive measures” U.S. Commerce Dept. head Wilbur Ross is also approving letting a temporary general license expire for some international activities.
“The new rule makes it clear that any use of American software or American fabrication equipment is banned and requires a license,” Ross said in a Fox Business interview.
As for Secretary of State Pompeo, the official, known for his endorsement of some of the more belligerent communiqués from the White House, has said the new rules “will prevent Huawei from circumventing U.S. law through alternative chip production and provision of off-the-shelf chips.”
It all sounds very stoically protectionist, but even as these U.S. officials are trumpeting the banishment of Huawei from the American marketplace, some U.S. companies that could be most affected are lobbying for some amount of reversal.
For example, Qualcomm, which received 48% of its revenue from China in 2019 according to market estimates, is arguing that it should be okay to sell Huawei chips for the smartphone market (as opposed to networking) and suggests that any restriction may jeopardize the U.S. position on emerging 5G networks.
There’s also the convoluted market impact from Huawei’s decision to discontinue making its Kirin AI chipset. Leo Sun at The Motley Fool explains that after Taiwan Semiconductor bows out due to U.S. restrictions, Qualcomm, which would otherwise scoop up a lot of those sales, will lose them to MediaTek, a company not bound by the U.S. ban.
That’s just one example of how ideological trade restrictions fly in the face of actual U.S. business. American companies and analysts are also worried about the pending TikTok deal, where Trump’s promised to ban a Chinese-made messaging platform in America unless it gets bought out by Microsoft or some other American party.
It’s not hard to see how capricious protectionism can negatively affect markets. It’s important to look closely at these kinds of happenings if you have any stake in any of the big U.S. chipmakers or other companies that could be quickly and decisively affected.
