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From the editor’s desk: US-China trade war hits chip makers

29 May 2019 News

The escalating trade war between the US and China has the global economy on high alert, and unless things normalise soon it is going to have massive ramifications on many industries.

Following US president Donald Trump’s decision to raise tariffs on $200 billion worth of Chinese goods, China responded in kind by announcing it would raise tariffs on $60 billion of American products. Rather than spurring intensified negotiations and some sort of back-down, the Trump administration unsurprisingly responded to this by ratcheting up the tensions, saying it is considering raising tariffs on all of China’s remaining imports, amounting to about $300 billion worth of products.

The economic realities are that US citizens will bear the brunt of the increased cost of imported Chinese goods, and many would argue that Trump is more interested in picking a fight than the welfare of his people. But the fact remains that China has an abysmal record when it comes to protecting (and appropriating) intellectual property of foreign companies, and it was inevitable that the problem would come to a head sooner or later.

One of the biggest companies in the eye of the storm is Huawei. The Chinese telecommunications giant has come under intense scrutiny for its cybersecurity practices, by the US and other countries. The US became the first country to put the company on an official blacklist, when Trump signed an executive order giving the federal government the power to block US companies from buying foreign-made telecommunications equipment deemed a national security risk.

The argument from the American side is the concern that the Chinese government could force companies like Huawei to deliberately build backdoors into its products to spy on American networks. Huawei’s CEO has repeatedly denied this is happening or would ever be countenanced, but depending on your mind set you might think “well, he would say that, wouldn’t he?”

As a Huawei smartphone user, I’m relieved that all the cybersecurity concerns revolve around its telecommunications infrastructure equipment rather than its consumer products. What is worrying in the context of the larger trade war, though, is the fact that Google has announced it will comply with the executive order by blocking support to Huawei for US software, so while a Huawei phone will continue to function it may not receive updates to the Android platform, or to services such as Gmail, Chrome and Google Maps.

Semiconductor chip manufacturers were immediately impacted by these developments, with both Infineon Technologies and STMicroelectronics’ stock prices suffering. Other chip makers, including Intel, Qualcomm, Xilinx and Broadcom were also reported to have instructed employees not to supply Huawei until further notice, and if true, those companies’ revenues will inevitably also take a hit as a result.

On an unrelated note, communications minister Stella Ndabeni-Abrahams went on SABC’s Morning Live TV programme recently to say that one of the reasons for the delay in implementing digital terrestrial television (DTT) migration is the fact that so few people have registered to receive the free set-top boxes stockpiled by the government. “We have lots of boxes in our warehouse, we’ve been calling upon South Africans, the deserving ones, those that have household income of less than R3 200, to go and register in their post offices, so that we can have the database and they can access the boxes. There’s been a low uptake of the boxes.”

The problem with that argument is that the delay in switching on DTT signals has been one of the central issues around the hold-up all along. So if more people had registered for free boxes, rather than alleviating the problem, surely there would just be more disappointed people waiting for something to watch?

Brett van den Bosch

Editor



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