Sat, Jul 14, 2018 - Page 9 News List

China could strike US tech where it hurts in response to tariffs

By Gerrit De Vynck, Ian King and Mark Gurman  /  Bloomberg

US President Donald Trump’s latest move to ratchet up tariffs on Chinese goods raises the specter that China could strike back by tripping up US companies doing business in the Asian nation — and tech is especially vulnerable.

On Tuesday, the US said it would impose a 10 percent tariff on US$200 billion of Chinese-made products, from food to electronics, by Aug. 30. That is in addition to an already-announced US$50 billion in tariffs that could raise prices on almost half of everything the US buys from China.

Chinese President Xi Jinping (習近平) has vowed to strike back.

Chinese imports from the US are not large enough to match Trump’s tariffs dollar for dollar, but the country has other levers it could use, such as imposing new taxes and added regulations on US companies, slowing deal approvals, or encouraging citizens to boycott US products. San Diego-based mobile-chip giant Qualcomm Inc is still waiting for final clearance from China for its more than US$40 billion acquisition of NXP Semiconductors NV.

Combining US corporate revenue in China with exports to the country gives the US a trade surplus of US$20 billion, according to Deutsche Bank AG.

US-based companies that derive the highest proportion of sales in China are dominated by chipmakers and other electronics manufacturers, according to data compiled by Bloomberg.

Monolithic Power Systems Inc, a San Jose, California-based component maker, tops the list, with about 60 percent of its revenue from China.

China has used non-tariff tactics in the past. South Korean and Japanese companies have been targeted during times of political tension with increased regulation, harsh new consumer safety rules and mass boycotts inspired by China’s state-run media. Apple Inc only recently staged a comeback in China, one of the company’s most important markets. Tesla Inc just announced plans to build a Chinese assembly plant, but still needs to secure approvals and permits.

HOSTAGES

China is considering delaying merger approvals, the Wall Street Journal reported on Tuesday, citing unnamed Chinese officials.

NXP fell as much as 4.7 percent, the most since June 25. Qualcomm fell 1.6 percent.

That chip deal is one of the most prominent hostages of the brewing trade war between the US and China. Qualcomm promised investors that the transaction would be closed by the end of last year. NXP has given Qualcomm until July 25 to close the deal or their agreement will expire.

Qualcomm already won clearance through the investigation phase of China’s approval process, people familiar with the matter told Bloomberg earlier this year.

The final announcement, though, might be held up amid the high-level standoff over broader trade issues and the fate of Chinese telecom equipment company ZTE Corp.

The complexity of politically infused, cross-border acquisition approvals is relatively minor compared with the global electronics supply chain, which binds China and the US, and creates domestic tensions for both countries. An Intel Corp processor made in Oregon or Arizona will often head to Chengdu where it is packaged for final installation into a computer. That computer can then be assembled for a US company such as HP Inc by a Chinese subcontractor and shipped to the US for sale. It is unclear which parts of this process would be affected by US-China tariffs.

This story has been viewed 3887 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top