Well-respected global rating firm S&P has now come forward to claim that the ongoing ban on Huawei by the US government will have a far more severe impact on companies within the nation than on the OEM or its home region. The assessment reportedly comes down to a single point. American companies such as Qualcomm, Micron, Qorvo, and Lumentum depend heavily on Huawei's business to generate revenue.
While only around five to ten percent of Qualcomm's business comes down to deals struck with the embattled Chinese manufacturer, the hit to the bottom line of those other companies will be far greater. Huawei doesn't necessarily need to rely on those companies at all and has taken a number of steps to continue reducing reliance in the wake of the US-led ban.
Around 15-percent of the revenue generated by those companies comes from Huawei and S&P expects US semiconductor makers to feel the effects of the ban within the next couple of years. The impact will be exacerbated by the fact that 2018 was already a slow year for mobile sales and related industry leaders.
Results of the ban are already trickling down
The results of the ban on business with Huawei by US companies are already being seen in the US, in fact. US-based chipmaker Skyworks is just one of a few companies that are feeling the effects of the ban, beginning with the stock market. Skyworks was forced to lower its expectations for revenue and earnings. Others, such as Qualcomm, Texas Instruments, and Intel, just to name a few, have felt the crunch in that area of business too.
The present expectation is that will continue while the ban is in place.
Huawei has taken the ban in stride, refocusing efforts and putting as many as 10,000 of its workers to the task of building new solutions and software to replace those from Western companies, according to some leaked estimates.
With the backing of the Chinese government, S&P warns that Huawei could readily replace its supply chain with local components and solutions. So the situation will likely worsen for US companies as revenue from the world's second-largest smartphone OEM stops flowing in.
That will extend to a lesser degree, S&P also estimates, to the networking industry too. Previously Huawei's primary business in the lead up to the growth of its smartphone business 5G and networking are areas Huawei has excelled. The company is the world's largest supplier of related equipment.
Other organizations are scrambling to catch up on that front and the gap should be relatively small, the firm estimates, making the consequences of the ban on networking should be less prominent. S&P notes that the impact of spending on investments to stay competitive will not outweigh the impact of the ban on US suppliers and other partners of Huawei.
At an impasse
The circumstances leading to Huawei's initial ban and subsequent temporary operating license as it concerns US companies have been well documented and the Chinese OEM is not entirely without blame or unaffected either. This week, Huawei came forward to admit that its smartphone sales are slowing as a result of widespread mistrust emanating from its standing with the US and resulting limitations placed on it.
Estimates about how the situation will affect both the US and China as well as the impacts that have already been seen showcase what could ultimately be viewed as a stalemate between the two countries in the ongoing trade war. At worst, it shows that US companies will be even more impacted than China by the ban on its leading mobile company.