Make this your homepage
Business News
Home > Business News
AP Explains: US sanctions on Huawei bite, but who gets hurt?
TIWN
AP Explains: US sanctions on Huawei bite, but who gets hurt?
PHOTO : TIWN

New Delhi, May 22 (TIWN): Trump administration sanctions against Huawei have begun to bite even though their dimensions remain unclear. U.S. companies that supply the Chinese tech powerhouse with computer chips saw their stock prices slump Monday, and Huawei faces decimated smartphone sales with the anticipated loss of Google's popular software and services.

The U.S. move escalates trade-war tensions with Beijing, but also risks making China more self-sufficient over time.
 
Here's a look at what's behind the dispute and what it means.
 
___
 
WHAT'S THIS ABOUT?
 
Last week, the U.S. Commerce Department placed Huawei its so-called Entity List , effectively barring U.S. firms from selling it technology without government approval.
 
Google said it would continue to support existing Huawei smartphones but future devices will not have its flagship apps and services, including maps, Gmail and search. Only basic services would be available, making Huawei phones less desirable. Separately, Huawei is the world's leading provider of networking equipment, but it relies on U.S. components including computer chips. About a third of Huawei's suppliers are American.
 
___
 
WHY PUNISH HUAWEI?
 
The U.S. defense and intelligence communities have long accused Huawei of being an untrustworthy agent of Beijing's repressive rulers — though without providing evidence. The U.S. government's sanctions are widely seen as a means of pressuring reluctant allies in Europe to exclude Huawei equipment from their next-generation wireless networks. Washington says it's a question of national security and punishment of Huawei for skirting sanctions against Iran, but the backdrop is a struggle for economic and technological dominance.
 
The politics of President Donald Trump's escalating tit-for-tat trade war have co-opted a longstanding policy goal of stemming state-backed Chinese cyber theft of trade and military secrets. Commerce Secretary Wilbur Ross said last week that the sanctions on Huawei have nothing to do with the trade war and could be revoked if Huawei's behavior were to change.
 
___
 
THE SANCTIONS' BITE
 
Analysts predict consumers will abandon Huawei for other smartphone makers if Huawei can only use a stripped-down version of Android. Huawei, now the No. 2 smartphone supplier, could fall behind Apple to third place. Google could seek exemptions, but would not comment on whether it planned to do so.
 
___
 
WHO USES HUAWEI ANYWAY?
 
While most consumers in the U.S. don't even know how to pronounce Huawei (it's "HWA-way"), its brand is well known in most of the rest of the world, where people have been buying its smartphones in droves.
 
Huawei stealthily became an industry star by plowing into new markets, developing a lineup of phones that offer affordable options for low-income households and luxury models that are siphoning upper-crust sales from Apple and Samsung in China and Europe. About 13 percent of its phones are now sold in Europe, estimates Gartner analyst Annette Zimmermann.
 
That formula helped Huawei establish itself as the world's second-largest seller of smartphones during the first three months of this year, according to the research firm IDC. Huawei shipped 59 million smartphones in the January-March period, nearly 23 million more than Apple.
 
___
 
RIPPLE EFFECTS
 
The U.S. sanctions could have unwelcome ripple effects in the U.S., given how much technology Huawei buys from U.S. companies, especially from makers of the microprocessors that go into smartphones, computers, internet networking gear and other gadgetry.
 
The list of chip companies expected to be hit hardest includes Micron Technologies, Qualcomm, Qorvo and Skyworks Solutions, which all have listed Huawei as a major customer in their annual reports. Others likely to suffer are Xilinx, Broadcom and Texas Instruments, according to industry analysts.
 
Being cut off from Huawei will also compound the pain the chip sector is already experiencing from the Trump administration's rising China tariffs.
 
The Commerce Department on Monday announced an expected grace period of 90 days or more, easing the immediate hit on U.S. suppliers. It can extend that stay, and also has the option of issuing exemptions for especially hard-hit companies.
 
Much could depend on whether countries including France, Germany, the U.K. and the Netherlands continue to refuse to completely exclude Huawei equipment from their wireless networks.
Add your Comment
Comments (0)

Special Articles

Saumen Sarkar Saumen Sarkar
Anirban Mitra Anirban Mitra