Enlarge /. The Huawei logo at the Smart City Expo World Congress in Barcelona in November 2019.
Getty Images | SOPA images
The global chip and smartphone industry prepares for serious disruption after the US imposed tougher sanctions on Huawei, some of which said could mean "death" to the company.
Washington said Monday that no company worldwide would be allowed to sell semiconductors made with US software or equipment without a license if Huawei were involved at any point in the deal.
The move closed a loophole in a May version of the rule that allowed Huawei to buy chips off the shelf when they weren't specifically tailored to its designs.
Observers said that given the dominance of U.S. tools in certain segments of chip manufacturing, the new rule would be a blanket ban on any chip sales to Huawei that would affect its 5G device and cellphone business.
"We believe this move will severely (almost completely) limit Huawei's ability to source semiconductors from anyone," said Manish Nigam, head of Asian technology research at Credit Suisse, in a research note.
Huawei is likely to be finished as a maker of 5G network devices and smartphones once stocks run out early next year.
Dan Wang, Gavekal Research
The tightened US measures come as Huawei fights for the title of the largest mobile phone manufacturer in the world and tries to expand its 5G networks worldwide against the opposition from Washington.
"Huawei is likely to finish manufacturing 5G network devices and smartphones once stocks run out early next year," said Dan Wang of Gavekal Research in a report on the sanctions entitled "A Death Sentence For Huawei."
"This is now stopping (US chipmaker) Nvidia, Intel, all of them, and they weren't affected before," an industry expert said, adding that the tighter restrictions would affect billions of dollars in business across the industry.
Zhao Lijian, a spokesman for China's Foreign Ministry, said Tuesday that the new sanctions against Huawei were "outright bullying" and that the US was "expanding the concept of national security and abusing state power."
Analysts said MediaTek would likely be the first victim. The Taiwanese chip design house helped bring about generations of Chinese mobile phone manufacturers by offering off-the-shelf chip solutions. MediaTek stock fell nearly 10 percent in early trading Tuesday, causing semiconductor stocks across Asia to decline.
After the initial restrictions on Huawei chips in May, Huawei had planned to switch its smartphones from in-house developed chips to those from MediaTek in order to circumvent the ban.
"MediaTek will have an impact, although this will be partially offset by its 38 percent stake in other providers," said Randy Abrams, an analyst at Credit Suisse, in a research note. The bank downgraded the company to neutral.
Analysts said the news would spur rival smartphone makers to adopt Huawei.
"If Huawei can't buy chipsets for its cell phones, the cell phone business will likely go away," Jefferies' Edison Lee wrote.
He predicted that Oppo, Vivo and Xiaomi would gain global market share. This would strengthen Qualcomm as the three competing Chinese brands rely more heavily on the US chip design house that competes with MediaTek.
However, some analysts said Washington’s tough move against Huawei could be different if Beijing strikes back.
"Given the significant impact of such sanctions on Huawei, there could be retaliation against China," said Sebastian Hou of CLSA. He named Apple, Huawei's competitor in the smartphone market, and Qualcomm as potential targets.
South Korean computer chip manufacturers Samsung Electronics and SK Hynix, which supply memory chips to Huawei, assessed the potential impact on Tuesday.
"We understand that all chip shipments, including memory chips, to Huawei are subject to new US regulations," said Sanjeev Rana, a Seoul-based technology analyst at CLSA. Samsung and SK Hynix declined to comment.
Analysts saw some potential benefits from Huawei's problems for Samsung's mobile phone and 5G network business. "We can assume that the smartphone market will balance itself out with Huawei's market share that is being taken by other smartphones (companies) and therefore would be neutral for the demand for memory chips," added Rana.
Samsung shares rose Tuesday in Seoul while SK Hynix fell slightly.
In Japanese companies, the stake in Sony fell by more than 1 percent. Jefferies analyst Atul Goyal estimated that Huawei was Sony's largest customer in image sensors after Apple, accounting for around 20 percent of its image sensor's operating profit and sales.
"Sony has already reduced the output of image sensors and … (takes into account) the impact of Huawei in its forecast," said Goyal.
In the long term, analysts expect Sony to offset some of Huawei's losses by expanding sales to other Chinese smartphone makers like Vivo and Xiaomi.
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