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Leon Mathias

Why is the Trump administration targeting Huawei and how will it impact the share prices of its suppliers and the other Chinese telecom equipment makers?

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US President Trump’s executive order on Wednesday banning telecom firms in the country from installing foreign-made equipment is a move clearing aimed at prohibiting Chinese telecom giant, Huawei from doing business in the United States. Citing national security risk as the core reason for the sanctions, the US has also been urging allies not to use Chinese equipment for their next-generation 5G networks, threatening to stop intelligence sharing, and firing yet another salvo in the already intensifying trade war with the world’s second-largest economy.

With the move banning Huawei and its associate firms from purchasing components and technology from US companies without the prior approval of the Government, US carriers already using equipment manufactured by Huawei and other Chinese companies, especially the rural networks are clearly in a dilemma since the alternatives are far more expensive.

The dramatic US move had led to a sharp slide in the share prices of Huawei’s affiliates and some of the other smaller Chinese telecom companies on Thursday, such as New Sea Union Telecom, Tatfook Technology, Chunxing Precision, Shengyi Technology, Sunny Optiocal, Luxshare Precision Industry, and ZTE Telecommunications.

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