As noted by the Wall Street Journal, the US decision to ban Huawei or any China made 5G technology could force telecom giants such as Nokia and Ericsson to move their operations out of China or risk losing the US market completely.

After the 150-day review of the supply chain called by President Donald Trump, the US government will ask telecom companies operating in the US if they can develop hardware related to the next-generation 5G cellular technologies outside of China.

The administration has also banned Chinese telecom giant Huawei Technologies, one of the largest telecommunications equipment producers, from the US suspecting that the company has ties with the Chinese military and intelligence agencies.

The US also accuses Huawei of trade theft, fraud, and holds it accountable for the violations of Iran sanctions. Trump’s administration has also prevented Huawei from purchasing any American technology. According to reports, CEO and founder Ren Zhengfei recently stated that the company expects to lose $30 billion in revenue.

The Wall Street Journal also highlighted that Trump’s administration is considering placing China on its Foreign Adversaries lists.

Despite talks being in its early phrase, the US government is in talks with telecom companies and other Asian countries over possible relocation of equipment production.

Eric Xu representing Huawei told CNBC that US’s ambitions of becoming a leader in 5G mobile internet will not become a reality if they continue to block Huawei from the American market.

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The bull run on China stock markets ended when US President Donald Trump stated that the US would double tariffs on $200 billion worth of Chinese goods. He also threatened to include items in the list that were not previously included.

The Shanghai Composite Index is down 13 percent from its April high. The collapse in share prices have wiped off $1.2 trillion in market capitalisation.

Chinese liquor distillers like Kweichow Moutai and Wuliangye Yibin are trading at record highs. These stocks have held unto most of their gains this year. Analysts also believe that listed pig and chicken breeders like Muyuan and Shandong Minhe may still rise on supply constraints.

Analysts say that they see a good buying opportunity as the chances of a long drawn out trade war between China and the US is minimal. Analysts in China quoted by the Hong Kong daily expect the US and China to reach a trade deal in some time.

Dai Ming a Shanghai-based fund manager at Hengsheng Asset told South China Morning Post that most of his company’s stock holdings were in banks whose book value stock prices are cheap enough to survive market turbulence. He also said that he was avoiding smaller firms heavily focused on overseas sales such as furniture and electronics manufacturers.

The Hang Seng Index could fall below the 27,000 mark by the end of this week, Francis Lun, CEO of Geo Securities told SCMP. The index started the year at 25130.35. Considering the losses this month, it is only five percent higher now from the beginning of the year.

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Google spokesperson said, “We are complying with the order and reviewing the implications.” He also added that for Google users, services such as Google Play and protections from Google Play Protect will function normally on existing Huawei devices.

According to reports from Bloomberg, Intel, Broadcom, and Qualcomm are freezing their business with Huawei, until further notice. The move is effective immediately. Another Bloomberg report suggests that Huawei has anticipated this situation for a long time. The company has stockpiled enough chips and other components in an effort to keep its business running for at least three months.

“The impact on Huawei will be extremely significant. An obvious impact is on the supply chain, but there is another layer of impact on confidence and its overall business,” Cui Kai, a telecom analyst with IDC, said. “It will also have a negative impact on the 5G technology evolution around the world.”

The Trump administration’s move against Huawei may have consequences in the near future. For example: blocking the sale of components such as semiconductors could affect the business between Qualcomm and Micron Technology, and stall 5G wireless networks’ developments worldwide.

According to Kai, Huawei has been well prepared in various areas, including ‘R&D and business continuity’ to ensure its operations are not severely affected under similar circumstances. 

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The Nikkei Markit manufacturing purchasing manager’s index for Asean countries moved up to 50.4 in April. The index showed a return to growth in March with a reading of 50.3. A reading above the 50 mark shows strength in the sector.

Companies hired more workers and created jobs at the fastest pace in 2019, the survey found. Even though China is the world’s manufacturing hub, the advantage is under threat from regions such as Southeast Asia as costs rise.

Thailand and Myanmar led the five Southeast Asian countries showing improvement in operating conditions. Operating conditions still contracted in Malaysia and Singapore, albeit at a slower pace in Malaysia.

Overall, manufacturing companies in Southeast Asia seem to be hopeful of a positive outcome of the Trump Trade war talks between the US and China. For the Southeast Asian manufacturing companies, new export orders in April rose for the first time since July 2018.

US and Chinese trade war negotiators had a ‘productive’ meeting early this week in Beijing, the US government informed. The Trump trade war negotiators will meet again in Washington to finalise a deal on the tariffs.

Some export-driven manufacturing companies in China are expected to gradually move their production to Southeast Asia. However analysts are not unanimous about whether Southeast Asia will become the manufacturing hub of the world in the way China did in two decades.

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