The Trump administration’s concerns about Huawei spying and limits on sales of U.S. chips and manufacturing equipment will hurt the semi industry, analysts say
In a bizarre twist, the impact of the COVID-19 pandemic and 30 million U.S. jobless claims could sideline efforts by the Trump administration to further restrict technology trade with China.
That’s the view expressed by several technology analysts on Wednesday. They discussed the ongoing trade battle between China and the U.S. largely over Trump administration concerns that Huawei 5G networking gear isn’t secure and can be used by the Chinese government to spy.
“If we weren’t in COVID-19, the worst-case scenario [for China trade] could have unfolded,” said Will Townsend, a senior analyst for Moor Insights & Strategy.
“With COVID, the administration will realize the cost of what it’s doing. There’s a lot pressure from pandemic unemployment,” added Ernest Worthman, executive editor of Applied Wireless Technology. They spoke in a conference call on Wednesday sponsored by Huawei and facilitated by RCR Wireless News.
President Trump and hawks in Washington have taken the wrong approach on U.S.-China trade, the group said. “It’s an emotional approach rather than a logical approach. Most people are simply shaking their heads,” Worthman said, referring to semi industry executives and other officials. The administration is “ignoring the ramifications of anti-China policies,” he added.
Townsend, Worthman and a third analyst, Michael Yang of Omdia, argued generally in favor of open trade between the U.S. and China that protects intellectual property of all technology companies and minimizes the threat of security breaches sponsored by the Chinese government. They said restrictions on China trade have already hurt the U.S. semiconductor industry, which is the global leader in the field with half the world’s market share.
A year ago, the U.S. placed Huawei, among others, on a U.S. Commerce Department entity list that prevented U.S. semiconductor makers from selling chips and electronics to Huawei, stirring concerns from many U.S. chipmakers. Recently, new restrictions have been discussed in Washington affecting foreign companies like TSMC in Taiwan that use U.S. semi fabricating equipment to supply Huawei, Townsend wrote in a recent Forbes column. The restrictions would require the U.S. to issue licenses before TSMC could deliver silicon to Huawei, in one example.
Townsend argued that the proposed restrictions would lessen the U.S. supply base with China adapting to produce their own fabrication equipment. China has formally created a $29 billion state-backed fund to create its own semi supply chain with chips and manufacturing to reduce its dependence on U.S. technology.The Security Industry Association commissioned a Boston Consulting Group report released in March that argued U.S. restriction on trade with China could end U.S. leadership in semiconductors.
“The best case [for technology trade] is open competition that allows people to be creative,” Yang said.
One reason that the Trump administration might pay less attention to trade issues with China is that administration officials are now focused on criticizing China for withholding information about COVID-19 early in its spread. Also, U.S. Trade Representative Robert Lighthizer has pivoted to a role in lifting tariffs on needed medical products and other duties related to the pandemic.