The U.S. semiconductor industry rallied the Commerce Department and Trump administration to modify the existing ban and allow U.S. companies to continue to selling to Huawei. Read the full story at Bloomberg.
U.S. Semiconductor Industry Granted Permission to Sell to Huawei
Analyst Take: The U.S. semiconductor industry (represented by the Semiconductor Industry Association) was feeling tremendous stress by the looming sanctions and trade bans against China and specifically Huawei.
Trump’s decision to overturn the trade restrictions to allow U.S. semiconductor manufacturers like Qualcomm, Intel, and Broadcom to continue selling to China was important given the size of the business (~1/3 of revenue) and the perception that the ban had, specifically any indication to the world that the U.S. chipmakers may not be dependable for business dealings in a time of seemingly erratic decision making from the executive branch.
One of the most interesting gaps in the announcements that came from Trump following the decision to lift the ban was the lack of specificity. Concepts like allowing the companies (like Intel, Qualcomm, AMD) to ship some of their components that provide less risk prove to be ambiguous at best. Trump used terms like “Low level chips” versus “5G.” I have to wonder if he really has any idea as to the difference in the products. With these companies having massive product lines with often dozens (or more) SKUs in a single line of CPU chips, how in the world will it be decided what is safe to ship and what isn’t?
Obviously, the total ban would have put tremendous stress on Huawei, and I think that is something that Trump sought as a lever in his technology trade ban. The company has become one of the most powerful players in telecommunications, networking, servers, and mobile, and this is of great concern to the U.S. I do believe that some of the limitations imposed could slow Huawei, without having it cause such significant harm to the U.S. semiconductor companies like potentially cutting off up to one-third of their revenue stream.
I have a strong feeling that this pause in the trade conflict is just that, a pause. Given much of the outspoken issues related to fair trade as well as fears of how technology may be applied by China to capture state secrets, this conversation is sure to continue into the future. However, for now, the lobbying of the semiconductor industry has allowed business to continue (somewhat) as normal and until there are better, more concrete plans for dealing with these ongoing issues, I see this as good thing.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.