Huawei ban ‘could backfire on US tech companies’

A ban on Huawei products would probably hurt technology companies, including those in the US, more than telecommunications operators, says credit ratings agency S&P Global Ratings.

In May, US President Donald Trump effectively banned Huawei from the US market and added it to a list that restricts US companies from doing business with the Chinese technology giant, which makes smartphones and supplies network equipment to telecoms operators.

Restrictions on equipment made by Huawei “could have wide-ranging impacts on the industry worldwide”, S&P said in a statement.

The agency said it had not taken any rating actions “for now” on the companies it rates in the sector.

A US ban on China’s ZTE in 2018 lasted four weeks, though that “may not be indicative of the outcome for Huawei".

“Currently, we view the short-term risks to tech as more prominent than for telecom companies given the more direct and near-term revenue impact on suppliers to Huawei,” S&P credit analyst Mark Habib said.

The supply ban would probably boost Huawei and China’s efforts to accelerate technology investments and reduce reliance on foreign suppliers for critical components.

That could lift competition in the technology sector and “potentially lower the long-term growth prospects of US technology firms”, the ratings agency said.

It was too early to tell if restrictions would hamper China’s ambitions to be a leader in 5G technology, or if they would backfire “and leave countries like the US behind”.

“Much will depend on how badly Huawei is constrained and how ready competing equipment-makers are to take the lead.”

Habib said while the short-term consequences of a ban for technology and telecoms companies were manageable, “the long-term stakes, particularly for tech, could be decisive”.

hedleyn@businesslive.co.za