Short-Term, Ban on Shipments to Huawei Would Hit Tech Harder Than Telecom, Says S&P

Short-term risks from U.S. restrictions on gear from China-based Huawei would be felt more by tech companies than telecoms, due to more direct and near-term revenue impact, reported S&P Global Ratings Wednesday. Expecting further developments in the trade war between the U.S. and China, the researcher said the impacts of bans “are not yet certain.” The ban on China-based ZTE last year lasted four weeks but “may not be indicative of the outcome on Huawei,” said S&P, which believes the ban will be a “catalyst” for the Chinese company and the government to “accelerate their technology to reduce reliance on foreign suppliers for critical components.” That could ratchet up competition in the technology sector and lower long-term growth prospects for U.S. tech firms, it said. Tuesday, Silicon Labs Chief Financial Officer John Hollister said (see 1906110068 or 1906110058) the May Commerce Department Bureau of Industry and Security notice banning shipments to Huawei will have “half a quarter impact” on Q2 revenue. Consequences for telecom companies will vary by country, relating largely to long-term 5G investment decisions, giving operators “more time and options for managing the fallout,” said S&P's Mark Habib. With China aiming for leadership in 5G, “stakes are high” because deployment will be key to “a vibrant economic environment” for countries and regions, the analyst said. Using history as a guide, Habib said leaders will have an edge in the development of the next wave of technology innovations such as cloud computing, IoT and autonomous vehicles. “It's too early to tell if restrictions will slow China's 5G ambitions, or backfire and leave countries like the U.S. behind,” he said. Much will depend on “how badly Huawei is constrained and how ready competing equipment makers are to take the lead.”