Asia chipmaker shares dive after huawei demise sentence

Billions of dollars in market value have been wiped out from listed chipmakers in Asia after the United States announced new sanctions against Huawei, which an analyst charged a “death sentence” for the Chinese telecommunications group.

Taiwan’s MediaTek fell 9.9% on Tuesday, while Hong Kong-listed hardware makers Sunny Optical and AAC Technologies fell 11.5 and 5.3%, respectively. All three supply technological components to Huawei.

The sale took place after the Trump administration on Monday ad strict new limits on the sale of all US-made chips to Huawei, which will limit the Chinese company’s access to components such as those needed for 5G mobile networks. The United States has accused Huawei of technology theft and violation of sanctions, while urging allies not to use its equipment.

“The US government has passed a death sentence on Huawei,” said Dan Wang, analyst at Gavekal Research. “Huawei has likely finished manufacturing 5G networking equipment and smartphones once stocks run out early next year.”

The new sanctions, announced by US Secretary of Commerce Wilbur Ross, require companies to obtain a license before selling any microchip made using US equipment or software to Huawei. Licenses will be required even if Huawei is not the end customer and only plays an intermediary role in the supply chain.

Previous sanctions had allowed the production and sale of chips made with American technology to Huawei as long as they were not designed by the Chinese company or its subsidiaries.

Analysts say MediaTek, which makes chipsets for smartphone companies, is particularly vulnerable to the new sanctions. The company had positioned itself as a replacement supplier to Huawei following previous sanctions.

“The US government is completely locking down Huawei and leaving it no alternative,” said Sebastian Hou, head of technology research at CLSA, who added that the Chinese group’s mobile business was at risk without a supply from MediaTek.

MediaTek said in a statement following the closure of the Taiwan Stock Exchange on Tuesday that the change in US export controls would “have no major impact on the company’s short-term operating conditions.”

Roland Shu, analyst at Citi, said that MediaTek could actually benefit if Huawei’s smartphone business is hit as a result of the sanctions, as it could increase the market share of local competitors like Oppo, Vivo and Xiaomi. All three smartphone companies depend on MediaTek chipsets.

“In the event that Huawei is forced to leave the market for smartphones and other Chinese. . .[and]its peers take its shares, MediaTek’s total shipping could increase, ”Shu said.

The actions of Huawei’s rivals were supported by the announcement of the sanctions. Samsung Electronics, the world’s largest maker of smartphones and computer chips, climbed 3.3% in Seoul while the Shenzhen stock index of semiconductor companies rose 1.5%.

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