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Technology

Technology

Apple suppliers slide on China anxiety, rising competition from Huawei

TSMC Secures Subsidies for Expanding Chip Manufacturing
FILE PHOTO: The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters... FILE PHOTO: The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters, in Hsinchu, Taiwan, Jan. 19, 2021. Photo Credit: Ann Wang
TSMC Secures Subsidies for Expanding Chip Manufacturing
FILE PHOTO: The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters... FILE PHOTO: The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters, in Hsinchu, Taiwan, Jan. 19, 2021. Photo Credit: Ann Wang

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Apple suppliers slide on China anxiety, rising competition from Huawei. China’s tightening iPhone restrictions for government employees sparked a tech market sell-off on Friday, raising concerns that Apple (AAPL.O) and its suppliers might suffer from Sino-U.S. tensions and Huawei rivalry.

Apple shares fell 6.4% in the previous two days, knocking $190 billion off its market valuation after Beijing urged certain central government agency workers to cease using iPhones at work in recent weeks.
Huawei released two new smartphones on Friday, the foldable Mate X5 and Mate 60 Pro+, adding to a line it debuted last week that garnered worldwide notice for its resistance to U.S. sanctions.

The sequence of surprise new product announcements by China’s “national champion,” days before Apple’s iPhone debut drives sales concern in one of Apple’s major markets.

In 2019, the U.S. restricted tech exports to Huawei, which devastated its smartphone industry. Apple has done well in China.

Analysts predict its latest product releases may be the start of an Apple-rivalling comeback.

“It (Huawei) can manage the psychological expectations of the target consumer group before Apple’s press conference,” said Counterpoint analyst Ivan Lam.

“We think Huawei’s action was planned and not spontaneous. Our new product release forecast is better than expected.”

It was unclear how extensive the iPhone ban is, as China’s core government agencies’ employee numbers are not publicly published. Some personnel told Reuters they had no such orders.

However, Bank of America believes that China sells up to 50 million iPhones annually, and a ban may cost 5-10 million.

This proposed ban is “interesting” because “the recent launch and availability of a domestic high-end smartphone as a real alternative to an iPhone coincides with the timing of this potential ban.”

US INSPECTION

Some Wall Street analysts said the limits showed that even a firm with a solid relationship with the Chinese government and a major presence in the world’s second-largest economy was vulnerable to escalating tensions.

Beijing wants to minimize its dependence on American tech, while Washington wants to limit China’s access to crucial technologies like cutting-edge semiconductor technology. Sino-U.S. tensions have increased.

The U.S. Commerce Department said late Thursday it’s gathering further information “on the character and composition” of the new Huawei chip that may violate trade rules.

“The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself — at a substantial cost to the (Chinese) government,” the agency said. “We constantly assess and update our controls based on the dynamic threat environment and will take appropriate action to protect U.S. national security.”

White House National Security Adviser Jake Sullivan told Air Force One reporters the U.S. is investigating the Huawei chip.

Suppliers tumble

Qualcomm (QCOM.O), a key Apple supplier, fell 7.2% on Thursday, leading to significant tech losses.

Other iPhone suppliers, including Broadcom (AVGO.O), Skyworks Solutions (SWKS.O), and Texas Instruments (TXN.O), fell 1.8% to 7.4%.

“This announcement seems to have just refocused investors that the U.S.-China relationship is a big risk to current equity prices, particularly in technology,” said Cherry Lane Investments partner Rick Meckler.

Tokyo Electron (8035.T) fell 4% in Asia, while TSMC (2330. TW), the world’s biggest contract chipmaker and Apple supplier, fell 0.6%.

ASE Technology Holding (3711. TW), a major semiconductor testing and packaging company, declined 1.7%, while camera lens manufacturer Largan Precision (3008. TW) plunged more than 4%.

Luxshare Precision Industry (002475. SZ), which makes iPhone, MacBook, and AirPod connection cables and owns iPhone plants, declined by 2% in China. Huawei’s introduction last week hurt its stock.

After Huawei’s Mate 60 Pro+ smartphone announcement last week, semiconductor shares (.CSIH30184) surged 0.8% on the belief that its new chip demonstrated the business had surmounted U.S. sanctions.

Sunlour Pigment (301036. SZ) rose 20%, Shenzhen Rongda Photosensitive & Technology Co (300576. SZ) roughly 10%, and Semiconductor Manufacturing International Corp (SMIC) 0.7%.


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