Panasonic has halted shipments of some components to Huawei to comply with proposed US export restrictions in the latest setback for the Chinese telecoms equipment maker. 

The decision comes as companies across Japan’s tech sector including SoftBank, Toshiba and Murata Manufacturing are still scrambling to assess the impact of the US ban issued last week. 

Still, investors in Huawei were given some clarity after Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, said on Thursday that it would continue to ship to HiSilicon, Huawei’s chip design affiliate.

The decision averts a worst-case scenario under which Huawei would have been unable to replace at least some semiconductors it can no longer buy from US suppliers with products developed in-house.

Elizabeth Sun, a TSMC spokesperson, said the US move to put Huawei on an export control blacklist would have an impact on the global economy, but the effect on the semiconductor industry was hard to gauge so far because of the industry’s complexity.

TSMC’s guidance for the second quarter remained unchanged, she added. 


The value of components procured by Huawei from Japanese suppliers in 2018

Many semiconductor companies in third countries are scrambling to determine whether their use of US-made equipment, software tools or patents will subject further sales to Huawei to a US export licence — which in many cases is likely to be denied.

Under Washington’s export control guidelines, third-country suppliers to blacklisted entities need to apply for licences if US content exceeds 25 per cent of the value of their products or services. According to industry executives, it remains unclear whether Washington intends to count US-made machinery as part of that calculation in the Huawei case.

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Sebastian Hou, an analyst at CLSA, said the US content in TSMC wafers including manufacturing tools, materials and software, was between 19 and 22 per cent.

In a statement earlier in the day, Panasonic, which makes car batteries, smartphone components and other devices, said it had sent an “internal notification that it should suspend transactions with Huawei and its 68 affiliates that were banned by the US government”. 

The Japanese group said the ban applies to its goods that exceed the 25 per cent threshold. It declined to specify which of its components would be affected but said the impact on its earnings would be limited for now.

Panasonic’s move adds to a series of such blows for Huawei, with UK chip designer Arm disclosing that it would stop licensing essential technology to the Chinese company to comply with the US ban issued last week. Large mobile operators in Japan and the UK have also pulled planned launches of new Huawei smartphones. 

The uncertainty surrounding Huawei and the escalating US-China trade dispute also comes as many Japanese businesses are already expecting their profits to decline this year due to a slowdown in the Chinese market.

Huawei procured components worth $6.6bn from about 100 Japanese suppliers last year and had estimated the figure would rise to $8bn this year before the US ban was issued. 

The Chinese group declined to comment on Panasonic’s decision.

Other Japanese suppliers for Huawei include Sony, which makes image sensors, and Japan Display, which makes smartphone screens. 

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Sony executives have declined to comment on the issue. But Jefferies analyst Atul Goyal estimated that Sony generated about 15 per cent of its sales of complementary metal-oxide-semiconductor sensors from Huawei. The impact for Sony could be limited if Huawei loses share to other Chinese brands such as Oppo and Vivo, according to Mr Goyal. 

“But if Huawei loses share to Samsung, then Sony’s sales will get impacted,” he added. 

Apple supplier Japan Display generates about 3 per cent of its revenue from Huawei. A person close to the company said it was unlikely to follow Panasonic’s move since its products did not have 25 per cent or more of US-originated technology. 

Shares in Panasonic fell as much as 1.4 per cent on Thursday.



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