Huawei And The Trade War
With the tensions building up from the US & China trade talks building as both parties walk away from the table the other week. Businesses are starting to feel the pinch, one of which is Huawei, after Washington put them on the trade blacklist making it more difficult for them to work with American businesses. This decision was not taken well by China, which stated they will protect its own companies.
CEO and founder Ren Zhengfei recently stated that they are prepared if American chip maker company Qualcomm Inc and other US companies would not sell chips to Huawei. As their chip company HiSilicon would be able to ensure a steady supply for the majority of its products.
“We will not change our management at the request of the U.S. or accept monitoring, as ZTE has done,” Ren said.
With Washington imposing additional restrictions that Huawei and its affiliates could pose risks to national security, as stated by Commerce Secretary Wilbur Ross that are separate from the current trade war“.
We has not done anything that violates the law” Ren, said.
US prosecutors unsealed their indictment against Huawei in January which accused the company of engaging in bank fraud to obtain American goods and services in Iran which would move money out of the country through international banks.
Meng Wanzhou, Huawei’s CFO, Ren’s Daughter, who was arrested in Canada is for her apparent involvement with the indictment is currently fighting extradition and maintains her innocence. Ren believes that the arrest was driven by political motivation.
Huawei Culture Co Ltd (SHE: 002502) is currently trading at 3.67 Yuan with a YTD decrease of 9.11%.
Huawei’ suppliers are currently scrambling to see how they will be affected by the Trump administration’s ban, the ban would impact the USD$70 Billion global components market.
Additionally, “There could be direct and indirect effects on Japan,” Japan’s Finance minister Taro Aso said. “There are Japanese companies that supply parts to Huawei and supply chains are intertwined in complex ways.”
Of Huawei’s 92 core suppliers; 25 are Chinese, 11 are from Japan, 2 from South Korea, 10 from Taiwan and 33 from America. All of which look like they will be affected by the ban.
Natixis’ Gary Ng stated, “The move by the US is consistent with the Trump administration’s strategic goal to reshuffle the global supply chain.
Huawei and its supplier’s shares tumbled following President Trump’s announcement.
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