The trade war between the United States and China is hitting the heart of the American computer industry.
Following the decision of the US administration to blacklist Chinese tech giant Huawei in May, business has not been good for American chipmakers. The new proposed China tariffs by US president Donald Trump is set to hurt the industry further.
The ongoing trade tensions with China and restrictions on selling to Huawei had s impacted the bottom lines and the earnings forecasts for American tech companies Intel, Qualcomm and Advanced Micro Devices.
“Tariff and trade uncertainties created anxiety across our customer supply chains,” Intel CEO Bob Swan said on a conference call with shareholders on July 25.
An overwhelming number of American companies want the trade war to end. Rather, Trump increased the trade tensions further on Thursday by announcing fresh tariffs of 10 per cent on Chinese goods worth $300 billion which were not put under US tariffs earlier. American chipmakers would be particularly hit by the latest round of tariffs because it would include laptops, smartphones and other technology.
American businesses are also threatened by the Huawei ban. Trump administration has been requested by American chipmakers to allow commencing selling their products to Huawei.
The Huawei restrictions were discussed last week between trump and chief executives from seven US suppliers to Huawei and included representative of companies such as Qualcomm, Google, Intel, Broadcom, Micron, Western Digital and Cisco.
US companies were barred from purchasing telecom gear form Huawei and selling products and technology to the Chinese firm in an order passed by the Trump administration in May this year. The US government believes that using the telecom products of Huawie would create a national security threat. This has been denied by Huawei. The US Commerce Department on a sop called “Entity List” in May that banned business for Huawei in The US.
While Trump had said in June that his administration would provide some leniency to the Huawei ban, there is still no clarity about how it would be done. US suppliers of Huawei are not unsure about whether they would be able to start business with the Chinese firm. According ot reports, the Trump administration has received several requests for licenses to start doing business with Huawei and US Commerce Secretary Wilbur Ross has said that decisions on the requests would be taken next week.
However, till such licenses are made available, US companies, especially chipmakers, are concerned that their sales would be hurt because of the Huawei ban and the general uncertainty over trade policies of the US government.
The revenues for the quarter ending June for Qualcomm fell by 13 per cent year on year and the company said that the Huawei ban was partly responsible for this. For eh same quarter, a 13 per cent year on year drop in revenues was also reported by AMD and the company said that this was mainly because of the addition of new Chinese companies to the Entity List and three of those companies are in joint ventures with AMD.
“We have stopped shipping some products to a couple of our customers that are on the US Entity List and that is a little bit of a headwind into the second half of the year,” AMD chief executive Lisa Su said on the earnings call.
Bank of America analyst Tal Liani believes that American companies have not yet felt the complete impact of the Huawei export ban. The Chinese firm had made excessive purchases from its suppliers in the US in anticipation of the US ban which means that the sale of the US firms had increased.
“Huawei built very high levels of inventory of components, so we have not seen any major impact as of yet,” Liani said. “But that’s temporary.”
A few American companies have announced that they have already started selling specific products to Huawei which they perceived were not under the export ban. The forts American company to announce this was Micron last month. Despite this, the sale revenues of the company and its earnings in the three months ending May fell because it was not able to sell all its products to Huawei.
“Resolving the trade issues is very important for Huawei and also for the US companies,” Liani said
(Adapted form CNN.com)