The US sanction on Huawei Technologies Co (華為) threatens to disrupt the Chinese company’s access to component suppliers and Taiwan’s networking sector could be affected the most, analysts said.
Huawei is the world’s largest maker of mobile base station and optical communications equipment, and the world’s second-largest smartphone vendor. It sources components from countries around the globe, including Taiwan.
However, Washington’s move last week to add Huawei and 70 of its affiliates to the US government’s “Entity List” would ban the Chinese company from procuring components and technology from US firms without US government approval.
The impact could extend to Huawei’s non-US suppliers if the potential ban is prolonged and the Chinese firm's production of base stations and optical communications equipment is forced to shut down.
“In terms of impact on supply chain revenue, we believe the networking sector would be hit hardest, followed by handsets, printed circuit boards (PCBs) and semiconductors,” Yuanta Securities Investment and Consulting Co (元大投顧) analyst Wang Deng-cheng (王登城) said in a report on Thursday.
“We estimate that the optical communications equipment and base station sub-sectors within the networking sector would suffer a decline in sales of 10 to 30 percent, followed by handsets (10 to 20 percent), PCBs (10 to 15 percent) and semiconductors (up to 10 percent),” Wang said.
Analysts said the US ban could hit a number of Taiwanese suppliers in the optical communications and networking equipment segments.
Optical communications firms that have higher Huawei exposure in terms of sales are LandMark Optoelectronics Corp (聯亞光電), TrueLight Corp (光環科技) and LuxNet Corp (華星光通), while the networking equipment suppliers that have higher Huawei exposure are Win Semiconductors Corp (穩懋半導體) and Universal Microwave Technology Inc (昇達科技), Wang said.
President Capital Management Corp (統一投顧) analysts led by Charlie Yeh (葉修劼) said that Huawei also does business with Elite Advanced Laser Corp (聯鈞光電) and PCL Technologies Inc (眾達科技) in the optical communications sector, and buys networking products from Gemtek Technology Co (正文科技) and Alpha Networks Inc (明泰科技).
The investment consultancy said that the ban would be far more significant than Washington’s previous trade ban on Chinese telecom equipment maker ZTE Corp (中興通訊), although its full impact would not be known until the US Department of Commerce publishes its full details.
“As Huawei has a higher share in the networking equipment market, which involves several Taiwanese suppliers, the US ban would hit market sentiment in the short term,” President Capital said in a report on Friday.
“If the potential ban is prolonged and the trade talks yield no progress, Huawei’s suppliers would see their sales negatively affected next month at the earliest, with increased uncertainty during the second half of this year,” it said.
Minister of Economic Affairs Shen Jong-chin (沈榮津) said at a meeting of the Legislative Yuan’s Economics Committee on Thursday that Taiwanese suppliers should seize this opportunity to find more customers, as orders placed with Huawei could be shifted to other companies such as Nokia Oyj, Ericsson AB and Alcatel-Lucent SA.
Additional reporting by CNA
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