- The US ban on technology produced by the Chinese tech giant Huawei could trigger a major retaliation by Beijing.
- Analysts say China could hit back at US tech giants doing business in the Asian nation, with Apple especially at risk.
- One analyst believes the effect on some US tech companies could be “disastrous.”
- Visit Business Insider’s homepage for more stories
The Trump administration’s ban on technology made by the Chinese tech giant Huawei could spark a tit-for-tat with Beijing that would turn the heat up on US tech companies, with Apple vulnerable as a high-profile target for retaliation, analysts said Wednesday.
One analyst thinks Beijing’s reaction could be “disastrous” for American companies.
The ban on American companies’ doing business with Huawei was imposed shortly after President Donald Trump signed an executive order aimed at “foreign adversaries” in the technology industry. According to the US Commerce Department order, Huawei is now prohibited from buying parts and components from US companies without US government approval.
Spying allegations versus Huawei
Among other things, the US fears that Huawei might allow China to use its technology for spying or to sabotage US infrastructure. Huawei has denied the accusations, while Beijing has denounced the charges as unfair.
“This is clearly targeted at China spying via Huawei, something that has not been conclusively proven yet,” the analyst Tim Bajarin of Creative Strategies Inc. told Business Insider. “But it represents a ban on a Chinese product in the US that has other ramifications.”
The spying allegations “could be real,” he added. But so is the possibility that China might react.
“China could retaliate by banning US products from the Chinese market using the same pretense, even it may be false,” he said. “A tit-for-tat fight that could be disastrous for any company that sells a lot of goods into China, especially technology-based goods, if they get banned for any reason as part of a Chinese retaliatory move.”
And coming on the heels of the recent tariffs that the US and China have imposed on hundreds of billions of dollars’ worth of each other’s goods, a Chinese ban on certain US companies could cause significant problems.
The Wedbush analyst Dan Ives said the US’s threat could just be bluster ahead of next month’s G20 summit in Japan.
“We think the bark is going to be worst than the bite, but this adds more noise when tech investors are already on edge,” he told Business Insider. “This is a major shot across the bow … They continue to ratchet up the heat in the kitchen especially with Huawei given the strategic importance of Huawei in China.”
If China hits back, Ives said, it could hurt leading tech names including the chipmakers Nvidia, Qualcomm, and Intel.
In a note in December following the US indictment of Huawei CFO Meng Wanzhou, the Bernstein analyst Stacy Rasgon said Huawei was “overall a sizeable buyer of semiconductors.” But he said the impact on major US chipmakers would be minimal.
Rasgon said the “supply chain could evolve,” helping ease the impact of the Huawei ban on US chip companies.
“If the semi companies can’t sell to Huawei and thus Huawei can’t sell equipment, other companies would eventually take up Huawei’s slack, companies that the semis can sell to,” he said. “In other words, the Chinese equipment companies would likely lose share to other non-Chinese companies providing similar products, assuming broad demand for those products remains.”
He added, however, that “the transition would likely be messy.”
A target on Apple’s back
The worst-case scenario, Bajarin of Creative Strategies said, would be if China were to hit back at Trump and “really hurts some major American company that sells a lot of products in China.”
“It could be companies who sell PCs, servers, and telecom equipment as a start,” he said. “But if it was true retaliation, it would be a major US company with a solid brand.”
Ives of Wedbush thinks the most vulnerable target would be Apple, perhaps the best-known US tech brand.
“The broader worry here is: Does this put more of a target on the back of Apple?” Ives said. “The poster child is Apple.”
Crawford Del Prete, the president of the research firm IDC, said he didn’t think a Chinese reaction would affect other areas of tech immediately.
“As for spreading to other areas, I do not see that as likely at this point,” he told Business Insider.
Huawei faces a tougher situation, he added, as it is barred from doing business with US firms.
“For Huawei, they will need to stay focused and on message that they are not a security risk, so that they can maintain business outside of the US,” he said.
Got a tip about Huawei, Apple or another tech company? Contact this reporter via email at [email protected], message him on Twitter @benpimentel, or send him a secure message through Signal at 510.731.8429. You can also contact Business Insider securely via SecureDrop.
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