How Huawei’s Blacklisting Could Spell Disaster for Your Investment

“The Tech Cold War Has Begun” – the headline read for an article on Bloomberg a couple of weeks ago.

This was following the recent US ban on Huawei Technologies Co and at the same time, barring chipmakers like Qualcolmm Inc., Xilinx Inc. and Broadcom Inc. from supplying to the Chinese tech company.

Not surprisingly, this has triggered a wave of panic around the world as users started to worry if their existing Huawei devices would soon be rendered worthless as Huawei’s fate seems to be hanging in the balance.

To make things worse, apart from having 12-months’ supply of microchips stored away in anticipation of the ban, the tech giant also doesn’t seem to have a concrete plan moving forward,

causing everyone to wonder if the brand will cease to exist within the next year.

On the bright side, Huawei has somewhat fortunately, remained a privately-owned company despite being one of China’s tech giant, hence, eliminating panic among would-be investors if they have been a public company.

Somewhat UNFORTUNATELY though, like any other mobile devices, Huawei is made up of many small components, both hardware and software, most of which are from listed companies within the U.S.

Therefore, while retail investors were saved from the entire saga by not being able to invest in Huawei itself, they are not completely out of the woods.

As the third biggest mobile vendor worldwide, Huawei is essentially pegged to a string of companies which could potentially suffer a hit from the episode or should the brand cease to exist.

Software

Alphabet Inc. /Google

Alphabet Inc. or Google are the makers of Android, the operating system on which Huawei’s mobile phones and many other brands run.

While most people believe that Google will not be greatly affected by the ban as China has been barring Google for ages,

majority of them missed out the fact Huawei also has a sizeable market share outside of China, which allows Google.

With their rapid expansion over the last 5 years, Huawei has become the second largest supplier for Android phones globally.

And while this could seem like good news for Google at the moment, they could also have the rug pulled out from under them the day the mobile brand call it quits.

Microsoft

While Huawei is majorly known for their mobile phones, their own brand of laptops which runs on Windows 10, is also well regarded.

And unlike their mobile phones, Huawei laptops are actually on sale in the US at the moment.

For a big company like Microsoft, it is highly unlikely that this episode with Huawei would cause their numbers to plummet by a big margin.

But it is also worth noting that with the ongoing trade war, other Windows laptop could also be next in line to appear in the blacklist, particularly big players like Lenovo and Xiaomi.

Hardware

Corning Inc.

Makers of Gorilla Glass, and the providers for Huawei’s P30 Pro glass, Corning Inc. is a multinational company which engages display technologies, optical communications and the likes. Hailing from New York, the company also sells its products under brands like Falcon, Pyrex and Axygen.

On top of that, just a month ago, their share price already took a surprising plunge of 10% within a day.

Micron Technology Inc.

Based in Boise, Idaho, Micron is the maker for Huawei’s storage chip that was built into Huawei’s mobile phone and has reportedly suspended shipments to the company.

Even though Huawei wasn’t their biggest client, the company has been displaying deteriorating and shaky fundamentals recently and within May alone, their share price has plunged by 24%.

Skyworks Solutions Inc. | Qorvo Inc. | QUALCOLMM Inc. | Broadcom Inc. | Xilinx Inc.

Various semiconductor companies involved in Huawei’s manufacturing have been instructed to stop shipping parts to the mobile company with immediate effect following the so-called tech cold war.

These include companies like QUALCOLMM Inc., Broadcom Inc., Xilinx Inc., and just recently, Qorvo Inc.

And while Huawei has been reported to store parts that could last them up to 12 months, it is unclear how this move has affected the books of these semi-conductor companies.

Samsung Electronics and LG Electronics

It is worth noting, that even though the embargo on Huawei has only affected US companies so far, South Korea, who has diplomatic relations with the U.S may also be dragged into the picture should matters escalate.

And as makers for Huawei’s OLED screens, Samsung and LG may also take a hit, albeit a minor one.

The ban on Huawei could just be the tip of a trade war iceberg and with recent seemingly escalating events, the drama on the trading floor could just be starting.

In fact, some of the companies that are involved in Huawei’s manufacturing process already had their stocks downgraded by analysts to prepare for the worst.

However, with solid knowledge, data and information, investors should not be running away in fear but to rejoice as this could be the start of a major financial crisis

which allows everyone to buy great stocks when they are massively undervalued due to the panic.

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Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this piece do not have current vested interest of the company. Please consult a competent professional for expert financial, or other assistance or legal advice.

Yen Hung Chua

Yen Hung Chua

I became an advocate of money management and value investing at the age of 27 for a simple reason. Money management, investing and MOST IMPORTANTLY, emotional stability – was never something that was taught in school. We end up a bunch of workers who are taught to only work for money but not the other way around, and to treat investing like a game of chance. And it was time to change that. Being with WealthPark, not only do I have the opportunity the spread the money-consciousness further and wider, but the platform on its own, is also wickedly useful for anyone who wants to invest in stocks.

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