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In background discussions, two top European officials told Asia Times that a US ban on the sale of electronic components to Huawei Technologies would not prevent the Chinese telecommunication company from deploying 5G mobile networks in Europe.
Europe does not really have a choice in this area, officials said during briefings because the United States does not offer a competing product and the competitors of Huawei – Ericsson and Nokia – have not neither the ability nor the knowledge to replace it. the Chinese giant.
The two Scandinavian companies do not offer serious competition to Huawei, but instead work in close cooperation with the largest Chinese company. Huawei's research and development budget is about double that of Ericsson and Nokia combined, according to public sources.
The activities of Huawei, Ericsson and Nokia in the European telecommunication infrastructure were so closely related that it is impossible to prohibit the sale of parts to one's business. They do not touch others, explained a manager. The official, who oversees the telecommunications policy of one of the Group of 10 countries, doubts that Washington's action has a considerable impact.
German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte told reporters on Thursday that they would not ban the Chinese firm, adding that policies were in place to protect their security. French President Macron said at a technology conference on Friday that "the French perspective is not about blocking Huawei or any other company, France and Europe are pragmatic and realistic." Macron pointed out that France would balance security with access to quality technology.
After the Trump government suspended US handset chip exports to China's smallest telecommunications company ZTE in the spring of last year, Huawei embarked on an accelerated program to produce its own state-of-the-art chips. I only reported in April that Chinese society had become self-sustaining in December 2018.
The Huawei Kirin chipset, designed by HiSilicon subsidiary and manufactured by Taiwan Semiconductor Manufacturing and other companies, effectively replaces the Qualcomm chips that equip most high-end handsets.
A note from HiSilicon's CEO, released last week, confirms that Huawei is independent in chip production, comparing the company's program aimed at achieving self-sufficiency in the Chinese Communist Party's long March 1934-1935.
Huawei imports dozens of electronic parts of US companies. Nikkei Asian Review and other media reported last week that Huawei had stockpiled an inventory of essential components for a year. Finding alternative sources or simply reversing product design is a much less difficult challenge for Huawei than developing one's own chipsets.
Google has suspended updates to its Android operating system for Huawei handsets, Reuters reported on Sunday. Huawei has developed its own phone operating system as a backup, but the ban imposed by Google would restrict Huawei's use of its applications, including Gmail.
China could fight back with a price war for advanced chips. Huawei has announced a comprehensive portfolio of AI-enabled chipsets under the Ascend brand, powering large data processors as well as handsets.
After acquiring a dominant position in telecommunications equipment, Huawei is now in direct competition with the best US chip design companies, including Qualcomm and Nvidia, in the processor business. Industry experts say China may retaliate against the US-imposed export ban by drastically lowering prices for its AI-activated chips, pushing US companies out of Asian and European markets. constitute the majority of their sales.
The export ban imposed by the United States could backfire, forcing Asian and European buyers to China's emerging technology. Huawei has become the leading player in the telecom equipment market by reducing its competitors, forcing its competitors to leave the market and recruiting their best talent.
Of the 188,000 Huawei employees, 40,000 are foreigners, many of whom are employed in the 21 research centers that the Shenzhen company supports around the world. If the Trump administration does not block the deployment of Huawei's 5G, as European leaders have indicated, Huawei could also become a dominant player in chip design and manufacturing.
Not surprisingly, semiconductor stocks were among the worst performers in the US markets last week. Nvidia posted the worst performance on the S & P 100, losing 7.2% over the week. Concerns over the trade war dominated sector performance in the S & P 500. Agricultural machinery was the worst-performing sector of the broad index, a result not surprisingly given the vulnerability of US agricultural exports .
The best-performing sectors were all negatively correlated with forward returns: utilities, real estate investment trusts, consumer staples, and homebuilders.
I continue to recommend the defensive sectors in the US in a barbell with Chinese stocks.
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