The fast view
- Eight months on from an initial ban on Huawei, the dispute continues as the US and China battle for technological supremacy.
- So far, the impact on Huawei has been less severe than expected, but the execution of contingency plans is having short-term and potential long-term effects.
- This includes alternative sourcing of components and efforts towards self-reliance in China, which is reshaping global supply chains.
- The acceleration of 5G in China is also benefiting companies in this supply chain.
- By combining robust bottom-up research and an objective screen to analyse inflection points in company fundamentals, an active approach can help identify potential winners and losers.
The battle for technological supremacy ensues
As US-China trade negotiations continue, so does the battle for technological supremacy. The Trump administration recently granted another 90-day licence extension for US companies to do business with China’s largest technology exporter Huawei, primarily to support rural telecoms networks.
Earlier this year, we considered the implications for investors from the US-China technology battle and how it could reshape global supply chains. These potential effects are summarised below:
- The ability of US tech firms to sell to China and vice versa could be severely disrupted.
- If the dispute escalates, US supply chains are likely to be reshaped away from China.
- China is likely to accelerate its technology policy and seek alternative sources of supply.
- Longer term, the US and China could diverge on critical technology standards.
In this viewpoint, we consider what has emerged so far and the influence of these dynamics on the semiconductor market. These developments highlight the importance of a global approach when assessing opportunities in technology.
Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.
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