Shares of Samsung Electronics rose nearly three percent on Tuesday due to mounting problems from its main rival Huawei, including Google’s decision to sever ties with the Chinese mobile phone maker.
It is the latest month-long saga between Huawei and analysts in the United States, who are warning of the possibility of declining demand for semiconductors in China, threatening an Asian recovery in the industry.
American internet giant Google, whose Android mobile operating system works with most of the world’s smartphones, said this week that it is cutting ties with Huawei to comply with an executive order issued by President Donald Trump.
The move could have dramatic implications for Huawei’s smartphone users, as the company will no longer have access to Google’s proprietary services, which include Gmail and Google Maps applications.
Investors are betting that Huawei’s loss could benefit Samsung, the world’s largest smartphone maker, which has faced increasing competition from its Chinese rival, raising its shares 2.7 percent at the close of the month. Tuesday.
Analysts say the US ban will hurt Huawei’s ability to sell phones outside of China, offering Samsung the opportunity to consolidate its position at the top of the global market.
“If you are in Europe or China and you cannot use Google Map or any Android service with a Huawei smartphone, would you buy one?” MS Hwang, an analyst at Samsung Securities, told Bloomberg News that he added: “Wouldn’t you buy a Samsung smartphone instead?”
Samsung accounted for 23.1 percent of global smartphone sales in the first quarter of this year, according to industry tracker International Data Corporation, while Huawei had 19.0 percent.
But Huawei’s woes can be a double-edged sword for Samsung, also the world’s largest chipmaker, if it leads to a drop in demand for semiconductors.
China dominates purchases from Asian chipmakers, buying 51 percent of their shipments in 2017, Bloomberg reported, citing an analysis by Citigroup. Including Hong Kong, it accounted for 69 percent of South Korea’s chip production.
“From our point of view, China’s electronics restocking efforts are likely to be weakened and delayed if tensions and the ban drag on, likely to hurt overall demand,” the report said.
Last week, Trump declared a “national emergency,” allowing him to enter the blacklisted companies as “an unacceptable risk to the national security of the United States,” said a move that analysts were clearly targeting Huawei.
The US Department of Commerce announced a ban on US companies selling or transferring US technology to Huawei, with a 90-day reprieve for allowing temporary licenses.
Tech2 is now on WhatsApp. For all the latest science and technology information, subscribe to our WhatsApp services. Just go to Tech2.com/Whatsapp and hit the Subscribe button.