Abu Dhabi, UAEThursday 18 July 2019

Donald Trump’s Huawei lifeline is also a reprieve for US tech suppliers

President Trump made concessions for Huawei at G20 summit, saying US companies can sell selective equipment to Chinese tech giant

Huawei's revenue forecasts have suffered from the US embargoes. AP
Huawei's revenue forecasts have suffered from the US embargoes. AP

US President Donald Trump’s decision to allow American chip makers to sell their products to Huawei will not only cut some slack for the biggest Chinese technology firm after months of unrelenting pressure from the US administration, but will also give breathing space to US companies not happy with the loss of billions of dollars in lost revenues from blanket ban on their supply to Huawei.

“It is a relief not only for Huawei but also for suppliers based out of the US ... ensuring smooth global trade,” said Tarun Pathak, an associate director with Hong Kong-headquartered research firm Counterpoint.

Mr Trump, while speaking to media on the sidelines of the G20 summit in Osaka, Japan on Saturday, said US companies can sell their equipment to Huawei but only items “where there’s no great national security problem”.

Shenzhen-based Huawei reacted by tweeting: “U-turn? Donald Trump suggests he would allow #Huawei to once again purchase US technology!”

The Huawei episode highlights the possible impact geopolitical situations can have can have on companies that sometime get caught in the middle of bigger policy tiffs between the nations – in this case, the US China trade war. It also serves as a lesson for the global conglomerates to be better prepared to handle such situations in the future.

“Now, they [companies] will be [better] prepared for such types of situations beforehand,” said Mr Pathak.

Last month, the White House barred US companies from doing business with Huawei, the world's largest telecommunications equipment maker and the second-largest manufacturer of smartphones, without prior special approval from US trade authorities. With no alternative, US technology companies such as Google - owner of the Android operating system – grudgingly complied, but conveyed their displeasure to the administration on potential loss of revenues.

The following week, however, the White House backtracked on the immediate Huawei ban, granting the company a three-month reprieve after US technology stocks tanked. Washington accuses Huawei of aiding Beijing in espionage, a claim the company denies.

Huawei, whose global smartphone market share grew 49 per cent in the first quarter of this year, is expecting a dip in the sale of its phones that rely on Google’s Android operating system. The company’s laptops also run primarily on US-based Microsoft’s Windows system.

Mr Pathak said the new development will give confidence to consumers buying Huawei’s laptops and smartphones.

“It will be a relief, even more for retailers selling those products.”

There has been, however, a backlash from political quarters and some businesses in the US, who consider Huawei a “strategic competitor and a threat to national security”.

Mr Trump, so far, is also not sure about completely removing Huawei and its affiliates from the commerce blacklist that prevents US companies from trading with it. A decision, he said, will be made in the coming days.

Sam Blatteis, chief executive of The Mena Catalysts, which advises technology companies on policy and government affairs in the region, said: “Let's see what happens [now] ... we have to wait and watch.

“We have to see how things unfold in the coming weeks. It is not clear whether Huawei will be removed completely from the entity list.”

Huawei-made equipment will be used on a large scale when the next-generation 5G wireless network comes online, powering everything from self-driving cars to the Internet of Things.

Taking a harder than expected hit from a US ban, the company's chief executive Ren Zhengfei slashed revenue expectations for 2019, saying the ban will cut revenue by $30 billion (Dh110bn) this year.

S&P Global Ratings projects that the US ban on Huawei could also backfire on US suppliers to some extent.

The “supply ban” will prompt Huawei and Chinese government to accelerate their technology investment to “reduce reliance on foreign suppliers”, said S&P, adding, this could eventually “lower” the long-term growth prospects of US technology firms.

Industry experts say Huawei is already looking for alternatives to the US market.

“Huawei has already started to look out of the US market, strengthening its position in Asia and the Middle East,” said Mr Blatteis.

Updated: July 1, 2019 07:46 AM

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