Trump's Huawei Ban Will Reverberate Beyond China
Consolidation will be much harder if Chinese regulators retaliate.
By
Alex Webb
May 20, 2019, 3:09 AM PDT Updated on May 20, 2019, 4:37 AM PDT
U.S. President Donald Trump’s decision to blacklist Huawei Technologies Co. may just have scuppered any lingering hopes for more cross-border mergers in the semiconductor industry.
On Friday, the administration barred U.S. firms from supplying components to the Chinese maker of telecommunications equipment, which it accuses of helping Beijing to spy. But uncertainty around the scope of the order means that chipmakers in Europe also decided to stop supplies to Huawei.
For now, the moves by Germany’s Infineon Technologies AG and others are precautionary while the finer details of the ban are examined. Companies are unsure whether the restriction extends to the U.S. operations of European firms. (Infineon said later on Monday it would continue to ship unaffected orders to Huawei.) The direct impact will, in any case, be limited: Huawei likely accounts for less than 5% of total revenue for Infineon and its Franco-Italian rival, STMicroelectronics NV.
Source: Bloomberg
Intraday times are displayed in CEST.
What is more significant is whether the U.S. ban prompts China’s Ministry of Commerce to take a stricter stance on approving future acquisitions by chipmakers. Its failure to sign off on Qualcomm Inc.’s $44 billion takeover of NXP Semiconductors NV ultimately sunk the deal last year. The regulator’s motivation appears to have been almost entirely political, with the decision coming amid the developing U.S.-China trade war.
The problem for Beijing will be if it becomes clear that a European firm with a significant U.S. footprint must adhere to the blacklisting. It would mean any cross-border acquisition involving a U.S. entity could jeopardize Chinese firms’ access to those companies’ products. The best way to eliminate that risk would therefore be for China to block any forthcoming deal.
bellwetherfor semiconductor consolidation, which had ground to a halt after the Qualcomm-NXP transaction fell apart. If China fails to approve the U.S. firm’s purchase of the maker of data center equipment, then the prospects for more acquisitions will dim.
A bigger test would come if any of the three biggest European chipmakers – Infineon, STMicro and NXP – decided to merge. They lack the scale of U.S. giants Intel Corp. or Qualcomm, and whispers about consolidation have surfaced intermittently.
Most recently, Bloomberg News reported in August that Infineon approached ST Micro about a prospective acquisition. The former has a significant footprint in the U.S., and China is the biggest market for both firms. That sort of deal would certainly have to be presented to regulators in Beijing.
Lawyers at the companies are scrambling to work out the exact extent of the supply ban. But it looks as though the Trump administration’s decision could entrench a balkanization which extends far beyond China’s borders.
Consolidation will be much harder if Chinese regulators retaliate.
By
Alex Webb
May 20, 2019, 3:09 AM PDT Updated on May 20, 2019, 4:37 AM PDT
U.S. President Donald Trump’s decision to blacklist Huawei Technologies Co. may just have scuppered any lingering hopes for more cross-border mergers in the semiconductor industry.
On Friday, the administration barred U.S. firms from supplying components to the Chinese maker of telecommunications equipment, which it accuses of helping Beijing to spy. But uncertainty around the scope of the order means that chipmakers in Europe also decided to stop supplies to Huawei.
For now, the moves by Germany’s Infineon Technologies AG and others are precautionary while the finer details of the ban are examined. Companies are unsure whether the restriction extends to the U.S. operations of European firms. (Infineon said later on Monday it would continue to ship unaffected orders to Huawei.) The direct impact will, in any case, be limited: Huawei likely accounts for less than 5% of total revenue for Infineon and its Franco-Italian rival, STMicroelectronics NV.
Source: Bloomberg
Intraday times are displayed in CEST.
What is more significant is whether the U.S. ban prompts China’s Ministry of Commerce to take a stricter stance on approving future acquisitions by chipmakers. Its failure to sign off on Qualcomm Inc.’s $44 billion takeover of NXP Semiconductors NV ultimately sunk the deal last year. The regulator’s motivation appears to have been almost entirely political, with the decision coming amid the developing U.S.-China trade war.
The problem for Beijing will be if it becomes clear that a European firm with a significant U.S. footprint must adhere to the blacklisting. It would mean any cross-border acquisition involving a U.S. entity could jeopardize Chinese firms’ access to those companies’ products. The best way to eliminate that risk would therefore be for China to block any forthcoming deal.
bellwetherfor semiconductor consolidation, which had ground to a halt after the Qualcomm-NXP transaction fell apart. If China fails to approve the U.S. firm’s purchase of the maker of data center equipment, then the prospects for more acquisitions will dim.
A bigger test would come if any of the three biggest European chipmakers – Infineon, STMicro and NXP – decided to merge. They lack the scale of U.S. giants Intel Corp. or Qualcomm, and whispers about consolidation have surfaced intermittently.
Most recently, Bloomberg News reported in August that Infineon approached ST Micro about a prospective acquisition. The former has a significant footprint in the U.S., and China is the biggest market for both firms. That sort of deal would certainly have to be presented to regulators in Beijing.
Lawyers at the companies are scrambling to work out the exact extent of the supply ban. But it looks as though the Trump administration’s decision could entrench a balkanization which extends far beyond China’s borders.
