Huawei and suppliers still face restrictions despite US-China trade pact
Morgan Stanley analysts forecast Huawei’s total smartphone volume at 200-million in 2020 or 40-million down on 2019
The first phase of the US-China trade pact had done little to allay fear about Huawei Technologies’ prospects and those of its key suppliers, two analyst research reports suggest.
Morgan Stanley and Credit Suisse warned of the likely trickle-down effect of US sanctions on Huawei should they remain in place or be tightened even further.
Restrictions could slow the pace of China’s fifth-generation networking rollout, which would affect Taiwan Semiconductor Manufacturing Company (TSMC) and fellow technology and manufacturing providers, one report said.
Tensions over tech are likely to remain as the Trump administration considers steps to further limit the ability of American companies to supply Huawei.
This comes even as treasury secretary Steve Mnuchin said on Wednesday he doesn’t “view Huawei as a chess piece” in continuing negotiations with China.
Morgan Stanley analysts forecast Huawei’s total smartphone volume at 200-million in 2020, a reduction of 40-million from 2019. Without regaining access to the Google Mobile Services suite on Android, Huawei’s “smartphone shipments would be close to zero in Western Europe”, said the analysts.
That compares to shipments of 29-million units in 2018 and 21-million devices through the first three quarters of 2019 for the region, they said.
The European market had served as a catalyst for Huawei’s consumer division, which was itself the biggest growth engine for the Chinese company.
Closer controls on Huawei would also affect its key suppliers. Chip-making giant TSMC, which counts Huawei as its second-largest customer after Apple, relies on its semiconductor orders for 10% of revenue, according to Bloomberg data.
Credit Suisse wrote that TSMC would lose a chunk of that business in the event of increased sanctions, though the hit would be partially offset by other customers like Apple and Advanced Micro Devices expanding their orders.
Some Asian tech names stand to benefit under new supply chain scenarios, Samsung Electronics most notable among them.
It is expected to soak up the Western Europe smartphone demand that would emerge without competitive Huawei devices on the market, Morgan Stanley said.
Credit Suisse echoed the positive sentiment, adding that the Samsung LSI chip-making division would “benefit supplying the mid-tier Qualcomm chips and Exynos family” in the absence of Huawei from key global markets.
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