China could move against Apple and Qualcomm in defense of HUAWEI

HUAWEI has been caught in the ongoing US-China stalemate for over a year now. However, things heated up quite a bit last week as the US extended the ban against HUAWEI for another year. To add insult to injury, the US also green-lit measures to cut of HUAWEI’s chip supply chain, targeting its acquisition of semiconductors from global chipmakers.

Now, China is reportedly planning a potentially damaging retaliation action against US firms. According to the Global Times, citing a source close to the Chinese government, China might add certain US companies to an “unreliable entity list.” US companies under fire reportedly include Apple and Qualcomm from the smartphone space, alongside Cisco and Boeing.

Needless to say, China is an important market for both Apple and Qualcomm. While iPhones accounted for only 7.3% of China’s smartphone shipments in Q1 2020, the country accounts for a sixth of Apple’s overall sales. 14.8% of Apple’s total revenue in the first quarter of this year came from China. Additionally, it’s also where most of Apple’s contract factories are located.

In the case of Qualcomm, it relies heavily on China as far as expanding its 5G business is concerned. Not to forget the numerous licensing deals it already has in place with Chinese OEMs.

What could China do to US companies?

Currently, it’s unclear what kind of sanctions China could impose on American firms. However, a source told Global Times that “China will take forceful countermeasures to protect its own legitimate rights.” These measures could include “imposing restrictions on or launching investigations” against the likes of Apple and Qualcomm.

“China will launch rounds of endless investigations on those firms, just like swords hanging over their head. It will dampen investors’ confidence and squeeze their income in the Chinese market,” an insider told the Global Times.

Meanwhile, China’s foreign ministry has also asked the Trump administration to stop its “unreasonable suppression” of Chinese companies like HUAWEI. “China will firmly defend its companies’ legal rights,” China’s foreign ministry told Reuters on Saturday.

For now, China hasn’t announced any countermeasures against the US. We’ll have to wait and see how this whole murky scenario plays out. According to Nikkei Asian Review, TSMC has already stopped accepting orders from HUAWEI given Trump’s latest restrictions, so a reaction from China could be expected soon.

Increasing US-China trade tensions could further drag down the smartphone market which is already seeing a major decline owing to the coronavirus pandemic. Will the consumer be the ultimate loser in this trade war? Based on what’s happening right now, it’s very likely.