The consequences of the Trump administration’s decision to blacklist Huawei could soon be felt by companies and consumers on both sides of the trade war. If China retaliates, an intricate supply chain built over decades could break under the strain.
A Huawei engineer displays parts in the research and development area of the Bantian campus in Shenzhen, China.
If China chooses to retaliate by restricting Chinese firms from serving U.S. customers or buying from American suppliers, then the intricate supply chain built over decades could break under the strain, forcing companies to scramble for alternatives. Chip manufacturers in the U.S. have provided an early window into the disruption caused by a ban on supplying Huawei, a company the Trump administration accuses of spying for the Chinese government. Out of the $70 billion that Huawei spent on components in 2018, $11 billion went to U.S. companies.
Finding viable manufacturers for consumer devices outside of the Chinese firms such companies rely on could take years. But they would at least have the option of passing rising costs down to customers to buoy their bottom lines as they reshape their supply chains. But that’s assuming that Apple still has smartphones to sell after being banned from China. The components for the company’s devices come from all over the world — gyroscopes from France, memory from Japan and Taiwan, Gorilla Glass for the touchscreens from Kentucky. But the vast majority are assembled in Foxconn’s factory complex in Shenzhen, China.Apple’s stock has dipped 13% this month in response to the rising trade tensions.
Google’s core business is advertising, with its search, email, content, artificial intelligence and operating system products all feeding back into the basic mission of amassing user data and using it to sell more effective ads to companies. So for years, Google has offered its Android operating system to smartphone manufacturers such as Huawei for free.
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