Huawei’s global supply chain being ripped apart

U.S. trade action against Huawei having intended impact.

China has termed the action taken by the United States against Huawei Technologies as “wrong actions” and has called for trade negotiations to continue. China’s comments underscores the effect of U.S. trade action which is cascading through Huawei’s global supply chains.

Japan’s Panasonic Corp has joined a growing list of companies who are disengaging from supplying components to Huawei Technologies Co Ltd, the world’s second-largest seller of smartphones and the largest telecom-gear maker.

British chip designer ARM has also stated, it has put its relations with Huawei in a pause mode and has stopped shipping components in order to comply with the U.S. trade action. The move essentially puts an end to Huawei’s ability to make new chips for smartphones.

Huawei uses ARM blueprints to design the processors that power its smartphones.

China is continuing its focus of wearing down the United States by wanting to engage in marathon negotiations from which it backtracks at will.

“If the United States wants to continue trade talks, they should show sincerity and correct their wrong actions. Negotiations can only continue on the basis of equality and mutual respect,” said Chinese Commerce Ministry spokesman Gao Feng. “We will closely monitor relevant developments and prepare necessary responses”.

The U.S. has accused Huawei of working for the Chinese government and of breaking U.S. law by supplying U.S. technologies to Iran.

Many investors and analysts are seeing this battle as a U.S.-China cold war.

“What we are witnessing is a potential reconfiguration of global trade as it has stood since World War II … investors should begin thinking about how sensitive their portfolios are to global supply chain-exposed shocks,” wrote Peter Garnry, Saxo Bank’s head of equity strategy, in a note titled “Are you ready for a cold war in tech?”

In a statement, Huawei’s founder Ren Zhengfei told Chinese financial magazine Caixin, he did not see ARM’s decision to suspend business with Huawei as having an impact on the company.

He went on to add, Huawei has a long-term agreement with ARM.

He speculated that ARM’s move could be seen in the content of its parent, Japan’s SoftBank Group Corp, waiting for U.S. approval for the merger of Sprint Corp, which it owns, with T-Mobile US Inc.

Analysts and industry experts have questioned Huawei’s claims of U.S. trade action having minimal impact on its business since Washington is imposing crippling sanctions which make it hard for the company to do business with U.S. firms.

The last round of negotiations were held on May 10. Since then no further trade talks between the top Chinese and U.S. negotiators have been scheduled..

In signs that reflect the effect of U.S. trade action against Beijing, a spokesman for China’s Foreign Ministry reiterated that China’s doors were always open for talks and that the situation with Huawei and other Chinese tech firms which the U.S. is targeting is making this increasingly difficult.

“Relevant U.S. actions obviously do not create a good atmosphere or environment for consultations,” said Lu Kang.

China has retaliated with its own levies on U.S. imports. However, given its trade surplus with the U.S. and the fact that it continues to make the prospects of conducting business in the country difficult for foreign companies and only uses its market as a leveraging tool, which has led many companies readjust their supply chains to other countries including India, Vietnam, Thailand, the impact of its retalliation has been soft and has led to more damage to its economy.

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