On May 16, the U.S. Department of Commerce put China’s Huawei on the “Entity List” as a national security threat. This move escalates a government campaign against the Chinese technology company beyond banning its products from sale in America. It means U.S. tech stocks are prohibited from selling sensitive tech to Huawei. Several days later, Huawei was given a 90-day temporary reprieve, but the damage is already being felt throughout the tech sector.
U.S. technology companies from chip makers to software providers are seeing their stock impacted by the Huawei ban. Some are being hit despite not being directly involved with Huawei — the move has further ramped up a trade war between China and the U.S. and that brings the threat of boycotts and retaliatory tariffs.
Tech Stocks Walloped by the Huawei Ban: Intel (INTC)
Intel (NASDAQ:INTC) sells processors to Huwaei for use in its laptops. Since the Huawei ban was announced on May 16, Intel stock has dropped. The company doesn’t depend heavily on Huawei — Bloomberg estimates that business is less than 1% of Intel’s total revenue — but losing it doesn’t help.
Micron Technology (NASDAQ:MU) is a U.S.-based semiconductor company. And it happens to supply the flash storage chips used in Huawei’s popular smartphones, including the new P30 Pro.
When the sales ban was announced, Micron’s business with Huawei was effectively cut off. Even with the relief of the temporary 90-day reprieve, Micron stock has taken a hit, down 8% from Friday morning.
Google doesn’t stand to lose much revenue in terms of hardware — its Pixel smartphones and Google Nest Home smart speakers don’t really have a presence in the China — but software and advertising revenue are another matter.
When the Huawei ban was announced, Google pulled Huawei’s Android license. New Huawei smartphones won’t get stock Android and they won’t have access to Google services. The prospect of the second largest smartphone maker in the world being severed from Google (cutting into Android licensing fees, Google Search ad revenue and Google Play revenue) has resulted in GOOGL stock sliding since last Friday.
TSLA has been on a dramatic downward trajectory all week, for many reasons that have nothing to do with Huawei. But Telsa stock is also feeling the indirect impact of the U.S. government’s move.
As the trade war heats up between China and the U.S., the prospect of new tariffs on goods imported into China and the potential for Chinese consumers to boycott American-made goods — including Tesla’s electric cars — have led to some analysts to predict TSLA could miss its 2019 sales targets by as much as 10%.
American telecommunication company Lumentum (NASDAQ:LITE) primarily makes optical components used in commercial lasers and networking equipment.
Huawei is also big in networking equipment (it was security concerns over the Chinese company’s push to supply 5G networking infrastructure that kicked off this current crisis), and it buys Lumentum components. As a result, Lumentum stock’s drop neared double digits on the day the Huawei ban was announced.
Qorvo (NASDAQ:QRVO) is another U.S. semiconductor company, with a heavy involvement in wireless and broadband networking, including 5G.
Half of the company’s revenue comes from Chinese customers and in updated financial guidance released on May 21, Qorvo says 15% of its 2018 revenue came from Huawei.
With that Huawei revenue in jeopardy and the Chinese market in general being increasingly affected by the trade war, Qorvo stock has dropped over 9%.
Corning (NYSE:GLW) isn’t always thought of as a technology company. But the American glass maker’s products are used in a slew of high tech applications.
One of those speciality products is the Gorilla Glass used to protect the displays of smartphones. And Huwaei is a Corning customer. With the business of the world’s second largest producer of smartphones in jeopardy, Corning stock has taken a tumble this week.
Broadcom (NASDAQ:AVGO) is another example of the tech stocks that have been negatively affected by the escalating trade war with China.
When Huawei was added to the Entity List, Broadcom announced it would stop selling components to the Chinese company. As a result, AVGO is down over 9% since the Huawei ban was first announced.
Advanced Micro Devices (AMD)
That’s not the case with the Huawei situation … AMD reportedly stands to lose 2% of its revenue by cutting off its business with Huawei. And the company could also suffer if increased tariffs hit its CPU and GPU business with other Chinese PC makers. AMD stock has taken a hit of as much as 7% since the Huawei ban was announced.
AAPL stock finds itself in a strange position with the Huawei ban. Any measures that hurt Huawei’s ability to sell smartphones should benefit Apple Inc, opening an opportunity to sell more iPhones.
However, Apple is very vulnerable to the overall trade war with China that Huwaei is a part of. Most of the company’s iPhones are assembled in China. And although iPhone sales have been slowing in China, the Chinese market, is still an important revenue stream for Apple. If China were to retaliate and ban Apple products from being sold there, a Goldman Sachs analyst estimated Apple’s profits could take a 30% hit.
So Apple joins the long list of tech stocks that are being impacted by the Huwaei sales ban, with AAPL down roughly 8% since Friday.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.