The tech saga that put’s Chinese mobile giant, Huawei, in the spotlight continues as the Chinese government pushes back against the United States and its policies that forced Google to ban the company and revoke its Android license, effectively compromising the future of the smartphone manufacturer.
A new set of stricter cybersecurity regulation has been drafted by Beijing in retaliation for Washington’s move to ban Huawei’s products, and it is now ready to be presented for “public consultation.”
The draft stated that “to improve the security and controllability of key information infrastructure and maintain national security,” companies purchasing “network products and services that affect or may affect national security” will now need to evaluate the national security risk before doing so.
“We don’t want to see another wall, and we don’t want to go through another painful experience,” Hu Houkun, the rotating chairman of Huawei, said during a speech near the site of the Berlin Wall, also on Friday. “We don’t want to build a new wall in terms of trade, and we don’t want to build a new wall in terms of technology either. We need an integrated global ecosystem which can help us to promote faster technological innovation and stronger economic growth.”
The stricter cybersecurity regulation that China is planning could potentially compromise the future of American companies in the country, a blow that would cost them so much money as China is one of the world’s strongest economic superpower.
The announcement follows not only the recent Google/ Android ban against Huawei but also another controversial ban from chip-maker ARM. As explained by Android Authority, “ARM is the lifeblood of the smartphone market, as it’s responsible for the inner workings of the vast majority of smartphones. Literally everyone in the smartphone industry licenses the company’s architecture and instruction sets… Huawei has seemingly lost the very technology it requires to make a modern smartphone.”
“This sets a dangerous precedent; Hu told his audience in Potsdam. “It goes against the values of the international business community, cuts off the global supply chain and disrupts fair competition in the market. This could happen to any other industry and company in the future if we don’t jointly confront these issues.”
Nonetheless, China still holds some sort of power to overturn these decisions to help Huawei. Several reports speculate that there is a possibility that China would ban Apple, U.S.’s biggest smartphone manufacturer from its market.
An analyst name Goldman Sachs estimated that if Apple is to be ban in China, it could lose 29% of its profits if China proceeds with the ban. China is responsible for 17% percent of Apple product sales, and such a ban could be awful news for Apple.
But whether or not China is poised to ban Apple is yet to be confirmed and the rest is purely speculation. UBS analyst Timothy Arcuri in a note he sent to investors regarding Apple’s performance entering March hints at the losing business of Apple in the Chinese Market.
“While March mix is still bad, the tone in the supply chain is starting to improve, and price reductions in China may be starting to clear channel inventory,” Arcuri says.
UBS has increased its June quarter estimate for iPhone from 3.25 million units sold to 3.45 million sold. Arcuri said however that this increase is not necessarily due to the increasing success of 2019 iPhones. He claimed that people’s interest in iPhone 8 Plus and other older iPhone models is ‘offsetting’ a performance drop in new iPhone models like iPhone X.
That being said, a ban on iPhone and other Apple products in China would not help the volatile situation the San Francisco-based company is currently in.
To make matters worse, the U.S. market is dwindling due to the market anxiety brought about by the U.S.-Huawei war. Analysts said that the U.S. tech market had been severely affected by the current political climate in the tech world.
While the status of Huawei remains in limbo until the company can figure out what to do following the Google/Android ban, the investors have grown weary on the security of the entire technology sector as Huawei is one of the most prominent players currently.
“If this remains enforced, it’s going to create some opportunity, but companies are working with their compliance departments to get out of the way of this Huawei situation,” said Quincy Krosby, chief market strategist at Prudential Financial. That’s difficult because “Huawei has its tentacles in so many parts of the technology sector. That’s why this is not a one-day event.”
Huawei’s competitor, Apple, has also suffered a drip in its trading, sliding more than 3% after an HSBC analyst cut down its price target citing the ongoing drama in the tech world.
“A trade war would hammer the U.S. and global growth, with obvious implications for asset allocation, equity sectors, and the dollar,” said Chen Zhao, chief global strategist at Alpine Macro, in a note. “But that outcome is plastered all over the headlines. Forgotten is that there are also upside risks for the U.S. economy.”