Amidst restriction from the United States, Chinese telecom giant Huawei threatens to snuff out a nascent recovery in the demand of semiconductors in the world. China dominates the exports in Asia having a large share of 51 percent. As per a report from Citigroup, China and Hong Kong had 69 percent of South Korean chip shipments, 56 percent of Taiwan’s, 51 percent of Vietnam’s and 43 percent of Japan’s exports.
The analysts of Citigroup said in a statement:
“In our view, China’s restocking efforts for electronic goods will likely weaken and be delayed if the tensions and the ban stay longer, which likely will hurt overall demand in the world.”
Meanwhile, the demand for semiconductor decreased on Tuesday. Only South Korean exports for the first 20 days of this month fell by 11.7 percent while total exports of China dropped by 16 percent.
Reason for Ban and the Future course of Action of Huawei
The U.S. intelligence believes that Huawei is backed by the Chinese military and hence its equipment could provide the Chinese intelligence services with a back door into its communication network. Meanwhile half of the chips used in Huawei equipment come from the USA and the other half are manufactured by the company itself.
The move could have drastic implications for Huawei Smartphone users as Internet giant Google, which runs the Android mobile operating system said it has begun to close ties with Huawei. The move will affect millions of Huawei users as they could not have access to Google services like Gmail, Google Maps, and Play store features and apps.
Moreover, many analysts believe this was about to happen anytime as Huawei has gained an advantage over others by gaining success in 5G technology. The U.S. commerce department is also pushing the company and other companies like Google which have adhered to the U.S. government’s plan.
The company CEO said that they cannot be isolated from the world. Ren said, they can also make the same chips as manufactured in the USA but we would like to work in close partnership with other companies as well.
Meanwhile, the US Department of Commerce issued a 90-day reprieve plan on the company which requires a transfer of technology. Till then the company would be working on a temporary license. The Company CEO Ren said that “The U.S. 90-day temporary license does not have much impact on us, we are ready”.
The International Monetary Fund has estimated that the future of economic growth will be defined by the biggest drivers in the Asia Pacific region for the world’s economic growth. However, Citi Group said in a statement, “In our view, China’s restocking efforts for electronic goods will likely weaken and be delayed if the tensions and the ban stay longer, which likely will hurt overall demand”.
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