Nancy Bambo | Equity Analyst | Momentum Securities | mail me |
Huawei is not listed, and the shares are owned by the employees. The move by Google is likely to have a negative effect on the company, and Huawei may lose some customers. That said, there may be a slight buffer of customer retention given the rollout of Huawei phones using its own operating system should the ban persist.
Further customers may be lost should other countries follow the US’ decision to not use Huawei products in their networks (so far Australia, New Zealand and Japan have banned Huawei usage on their networks).
48% of Huawei’s revenue comes from the consumer segment which is the segment likely to be most affected by the US ban. It is also the biggest revenue segment.
Will measures to counteract the impact of this be successful?
It’s hard to tell whether Huawei’s counteracts will be successful as it ultimately depends on customer satisfaction regarding the product offering.
In anticipation of the US ban, Huawei had already developed its own operating system, and sources only 17% of its smartphone chips from Qualcomm, (73% from Huawei and 10% from a Taiwanese firm MediaTek).
Similar impacts on other Chinese tech companies?
Six other tech related Chinese firms have been banned from “exporting sensitive US goods, with fears they may have supported Iran’s military”, all of which are unlisted.
“The impact on China technology counters from a technical perspective. The NASDAQ China Index (NQCN) shows clear technical weakness in recent weeks as the technology index has shed 12% with trend technical metrics strongly indicative of selling pressure in the Chinese technology sector. The losses have witnessed the NASDAQ China Index breaking below a key bullish trend line with clear deterioration in momentum indicators. A continuation of the current technology ‘spat’ would substantially increase the likelihood of NQCN trading below the lows of the year at 1,178 and for the moment there is no evidence of an improvement in technical and sentiment indicators.“
– Ernie Gruhn, Technical Analyst at Momentum Securities
“Android has a lot of enthusiasts due to the spread of the OS across devices. For a phone manufacturer to lose that (Android functionality), it could be a huge blow. Huawei relies heavily on Android for its OS and will have to replicate what they are doing in China, given certain costs. Phone manufacturer ‘Xiaomi’ is doing things differently. The trade war is the base of this break up, and could allow Apple to regain some market share which was taken by Huawei and other flagship killers.“
– Frank Kahumba, Equity Analyst at Momentum Securities
Consumers won’t be hit too hard since they have more options to choose from other than the flagships (Apple and Samsung) like Xioami and OnePlus. Huawei P30 pro and OnePlus 7 pro have brought flagship level specs and experiences to the market at a lower price point, increasing the competition for smartphones.
 like Xioami and OnePlus. ){kind=link}