- The US move has sent Huawei’s suppliers scrambling to see how they will be affected, particularly those who rely on it as their main customer
- More than half of the company’s core global suppliers are from Asia, and many see their shares tumble after the announcement
The United States’ move to blacklist Huawei sent ripples through supply chains in Asia this week, as companies scrambled to assess how the effective ban would impact the US$70 billion global market for components used by the Chinese telecommunications giant.
In Japan, Finance Minister Taro Aso on Friday said Washington’s fresh salvo against the beleaguered tech firm could impact the country’s firms and economic growth.
“There could be direct and indirect effects on Japan,” Aso said, following a cabinet meeting. “There are Japanese companies that supply parts to Huawei, and supply chains are intertwined in complex ways.”
The Trump administration this week added Huawei and 70 of its affiliates to its “entity list” of firms deemed threats to national security, effectively prohibiting the firm from buying US technology and components. The ban went into effect on May 17.
Trump also issued an executive order banning US firms from using technology produced by any company assessed to be a national security risk.
The Shenzhen-headquartered company – the world’s largest supplier of telecommunications equipment, which last year reported US$105 billion in revenue – counts more than two dozen Asian firms among its suppliers of key components for its products.
Chinese firms account for 25 of Huawei’s 92 core global suppliers, while 11 are from Japan, 10 from Taiwan, two each from South Korea and Hong Kong and one from Singapore. There are 33 American firms on its list of suppliers.
Major Asian suppliers include Sony, Murata Manufacturing, Toshiba Memory and Fujitsu from Japan; Korea’s Samsung and SK Hynix; Taiwan’s Nanya Technology and Taiwan Semiconductor Manufacturing Company; and Singapore’s Flextronics.
Shares in companies that supply to the firm tumbled across Asia following Trump’s announcement, with Samsung and SK Hynix dipping 2.4 per cent and 3.5 per cent respectively.
The company is highly dependent on US manufacturers for components, with 16 per cent of its 2018 orders, or nearly US$11 billion, going to American companies. It remains unclear whether the ban applies to all sales of any component made by an American firm, or applies only to a limited subset.
Any decision by Huawei to scale back operations as a result of depressed demand would also complicate the roll-out of 5G broadband networks across Asia, where numerous countries have embraced the firm’s technology.
A similar ban on China’s ZTE Corporation last year brought the smaller competitor to Huawei to its knees before it was removed last July.
RATING: #RobertReview (Huawei): 9 | 10
Published: 21st May 2019.