Earlier this week, The Burn-In reported a recent escalation in the U.S.-China trade war cost America’s five biggest technology firms $162 billion in one day. Now, a new volley from the Trump administration has caused some of the nation’s leading chipmakers’ stock to drop.
In a reversal of its earlier position, the federal government indicated it would delay approving requests by American semiconductor companies to resume their business relationships with Huawei.
Following Washington’s announcements, Micron and Western Digital saw their stock prices drop by around 2.2 percent on Thursday. Similarly, Qualcomm and Xilinx experienced a market capitalization decline of 1 percent.
Reversal of Fortune
In mid-July, the Trump administration said it would ease trade restrictions on Huawei after blacklisting the Chinese telecommunications company in May. Following a positive meeting with Chinese President Xi Jinping, President Donald Trump had even better news for the semiconductor sector.
Late last month, the Commander-in-Chief told the heads of Alphabet, Broadcom, Cisco Systems, Intel, Micron, Qualcomm, and Western Digital that the Commerce Department would soon issue licenses allowing them to sell chips to Huawei. That announcement was significant as the Sino telecom bought $11 billion worth of U.S. components in 2018.
However, tensions between the United States and China became exacerbated earlier this week when the Chinese central bank altered the value of the yuan. Furthermore, the Asian superpower discontinued purchasing American agricultural products pending the outcome of future trade talks.
Consequently, the Trump administration noted it would delay approving U.S. requests to resume selling components to Huawei. U.S. Department of Commerce Secretary Wilbur Ross told Bloomberg he has received 50 licensing requests and all are pending approval.
Moreover, the President declared he’ll impose a new 10 percent tariff on Chinese goods on September 1.
Huawei’s New Operating System
As of this writing, Huawei hasn’t made an official response to Washington’s latest trade war escalation. However, the Chinese conglomerate has made an announcement regarding its future that has major implications for one of its U.S. suppliers.
During the Huawei Developer Conference 2019, the firm’s consumer business group head Richard Yu officially announced it had developed its own operating system. The corporation’s new software is called HongMengOS but will be known as HarmonyOS in English-speaking markets. Yu explained the open-source platform would work on the company’s smartphones, smart speakers, and Internet of Things (IoT) components.
After the federal government put Huawei on a trade blacklist, Google said it wouldn’t license Android for use in Huawei’s forthcoming products. However, the corporation noted the ban wouldn’t affect its support of the Sino firm’s already released devices.
Yu noted that his company would roll out its new operating system in China before launching a global expansion. The executive also said Huawei would prefer to use Android but believed its branded software has one advantage on Google’s OS. He said that its system would cater to the burgeoning IoT market, whereas the American platform does not.
Notably, despite wanting to resume its old partnership, Huawei will now compete with Google in the global marketplace.
One implication of Huawei’s HarmonyOS rollout is the firm isn’t betting on a swift resolution to the Sino-American trade conflict. Furthermore, now that it’s making its own software, and is therefore no longer dependent on a U.S. supplier, the company might consider the benefits of locally sourcing its semiconductors. If that happens, the American chip sector will enter the 2020s with a lot of economic insecurity.