Global demand for semiconductors and other electronic hardware is not expected to decline as a result of Washington’s trade sanctions on Huawei Technologies Co (華為), Fitch Ratings Ltd said on Friday last week.
That is because a potential contraction of Huawei’s telecom network equipment and smartphone sales would likely be absorbed by the Chinese firm’s competitors, the rating agency said in a report.
Huawei is the world’s leading supplier of telecom equipment, 5G networks and smartphones. The Shenzhen-based company sources extensively from US semiconductor firms and uses Google’s Android operating system for its handsets. It also does business with other key suppliers in Taiwan, Japan and South Korea.
The US Department of Commerce last week added Huawei and its affiliates into the Bureau of Industry and Security’s Entity List, a move that aims to ban the company from procuring components and technology from US firms without government approval.
As the extent and duration of the US trade curbs are still uncertain, Fitch said: “We believe companies can divert sales to Huawei’s Asian and European rivals that will likely benefit from Huawei’s struggles.”
While the US last week granted temporary 90-day exemptions to some of Huawei’s suppliers and customers, the Chinese company could suffer a decline of 20 to 25 percent in shipments this year and suppliers with higher revenue exposure to Huawei’s smartphone business could be affected the most, Yuanta Securities Investment Consulting Co (元大投顧) said in a report on Friday.
Yuanta said the Chinese company's supply chain has postponed new projects for the second half of this year and adopted a wait-and-see attitude.
Moreover, all of Huawei's new projects and flagship Mate 30 production may be put on hold now, it said.
"We expect the company's weaker product mix in the second half of 2019 will be another downside risk for the supply chain, on top of shipment adjustment," the report said.
A preliminary analysis by President Capital Management Corp (統一投顧) said the US trade sanctions on Huawei could affect Taiwan’s semiconductor industry by about 1.5 percent in terms of revenue.
“Within the semiconductor industry, we believe the wafer foundry sector will be hit hardest, affecting its annual revenue by up to 2.35 percent,” President Capital said in a report on Tuesday.
The report estimated that the silicon wafer, packaging and testing, and IC substrate sectors would also suffer 0.5 percent declines in sales.
President Capital said the report is preliminary and does not take into account Google suspending services with Huawei, China’s potential retaliation or heightened nationalism against iPhone sales in China.
“The impact would enlarge further if the US and China cannot resolve their differences during the G20 meeting at the end of next month,” the report said.
However, local suppliers which have higher exposure to Samsung Electronics Co’s supply chain could benefit if the South Korean tech giant prospers from Huawei’s blacklisting, analysts said.
Taiwanese suppliers in Samsung’s supply chain include fingerprint sensor provider Egis Technology Inc (神盾), smartphone camera lens module maker Largan Precision Co (大立光), as well as heat dissipation module suppliers Chaun-Choung Technology Corp (超眾) and Auras Technology Co Ltd (雙鴻).
Handset chip designer MediaTek Inc (聯發科) and networking chip designer Realtek Semiconductor Corp (瑞昱) are also expected to gain from transferred orders from US companies after Huawei’s blacklisting, analysts said.
This story has been updated since it was first published.
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