President Donald Trump could issue an executive order that would prohibit U.S. companies from buying telecoms equipment made by companies such as Huawei Technologies and ZTE Corp, according to a Reuters report, a move that could add further pressure to U.S.-China trade relations.
Reuters said the order, which could be issued as early as next month, would allow the Commerce Department to block purchases of telecoms equipment from non-U.S. companies that pose risks to national security. Trump signed a $716 billion defense spending bill earlier this year that put some restrictions on foreign purchases, but lifted a ban that prevented ZTE dealing with U.S. suppliers amid allegations it had violated western sanctions on Iran and North Korea.
Advanced Micro Devices (AMD) - Get Report , shares which provides chips for Huawei's MateBook D tablet, were marked 2.07% lower in pre-market trading Thursday, indicating an opening bell price of $17.53 each, while Micron Technology (MU) - Get Report shares were seen 2.23% lower at $30.26 each. Intel Corp. (INTC) - Get Report , which announced it had completed some 5G network tests with Huawei in early December, was marked 0.74% lower at $45.85 each. Qualcomm Inc. (QCOM) - Get Report , another Huawei supplier, was marked 1.57% lower at $55.08.
Huawei, the world's second-biggest smartphone maker behind Samsung Electronics, said today it would likely see a 21% rise in 2018 revenues, to just under $100 billion, after shifting 200 million units around the globe despite restrictions from the U.S., Australia and New Zealand.
The company's CFO, Meng Wanzhou, who is also known as Sabrina, was arrested and bailed in Canada earlier this month, and faces extradition to the United States, amid charges she helped China-based companies evade Iranian sanctions.
The arrest drew harsh criticism from Beijing, with China's Foreign Ministry summoning U.S. Ambassador Terry Branstad to complain that "the actions of the U.S. seriously violated the lawful and legitimate rights of the Chinese citizen, and by their nature were extremely nasty", creating concern that the fledgling trade talks with the United States could be put on hold.
ZTE, for its part, is estimated to have paid more than 200 U.S. suppliers as much as $2.3 billion last year, including $100 million each to Qualcomm, Broadcom Inc. (AVGO) - Get Report Texas Instruments (TXN) - Get Report and Intel.
The Chinese government considers the ICT sector a "strategic sector", according to a study from the U.S.-China Economic and Security Review Commission published earlier this year, and it has invested significant state capital and influence on behalf of state-owned (information and communications technology enterprises) over the past 20 years.
In 1997, for example, computers and telecommunication devices, electrical equipment, and related machinery imports from China accounted for around a third of the overall total. Last year, that same group of products measured 54% of America's $375 billion trade deficit.
The study found that seven major American tech companies -- Hewlett Packard (HP) - Get Report , IBM (IBM) - Get Report , Dell (DVMT) , Cisco Systems (CSCO) - Get Report , Unisys Corp (UIS) - Get Report , Microsoft and Intel -- source more than half of their products and components from China.
"The U.S. government needs a national strategy for supply chain risk management of commercial supply chain vulnerabilities in U.S. federal information and communications technology, including procurement linked to China," the report said.