It doesn't look as if Huawei's U.S. imports will be returning to normal in the near-term.
However, it's worth keeping in mind that this is more of a problem for some Huawei suppliers than others. And one or two chip companies could actually benefit from Huawei's issues.
On Tuesday evening, The Wall Street Journal reported that -- in spite of the phase one trade deal, which was signed on Wednesday -- the Trump Administration is still looking to tighten restrictions on Huawei's access to U.S. technology. Citing sources, the paper reported that the Commerce Department "recently sent regulations to the Office of Management and Budget that would largely eliminate a loophole that allowed U.S. companies to sell to Huawei from their overseas facilities."
Reuters added that the Commerce Department is looking to lower the threshold for U.S.-made components within products that can require an export license from 25% to 10%, as well as to extend the rule's reach to cover "non-technical goods like consumer electronics including non-sensitive chips."
Huawei, as a reminder, is eight months removed from being placed on the Commerce Department's Entities List, which requires U.S. companies looking to export products to Huawei to obtain a license to do so. Some export restrictions on Huawei were subsequently eased, but many chip suppliers are still reporting that their sales to Huawei are markedly below what they were before the company was placed on the Entities List.
Given that Huawei sells everything from smartphones and laptops to data center and telecom equipment, a very long list of U.S. chip suppliers have seen a sales hit from Huawei export restrictions. The impact has been quite pronounced for some of these suppliers, while for others it has been a fairly minor issue.
Companies supplying chips for Huawei's mobile infrastructure equipment, such as Xilinx (XLNX) and Cree (CREE) , have seen a major sales hit. Huawei's large mobile infrastructure market has been a factor, and so has the fact that export restrictions for this part of Huawei's business appear to be particularly tight.
For suppliers whose sales to Huawei skew heavily towards its smartphone business, such as Micron (MU) , Skyworks (SWKS) and Qorvo (QRVO) , the impact hasn't been quite as bad. While these companies have generally reported that their sales to Huawei have dropped since last spring, they're still doing a meaningful amount of business with the company. Export controls don't appear to be as tight here, and Huawei's recent Chinese smartphone share gains might have also helped limit the fallout.
However, new Commerce Department rules could impact some of these ongoing sales. Moreover, there's a good chance that Huawei's smartphone share will take a tumble outside of China, given that the company has (for now at least) lost the ability to pre-install Alphabet/Google's (GOOGL) apps and services on its newly-launched phones.
But provided that Huawei's competitors generally reel in the smartphone purchases that would have gone to Huawei if not for the export restrictions, many of its mobile chip suppliers might not be hurt too badly. And it's worth noting here that January has seen three chip suppliers with meaningful smartphone exposure -- MagnaChip Semiconductor, Himax Technologies and Silicon Motion -- pre-announce better-than-expected sales.
And when it comes to Qualcomm's (QCOM) chip and patent-licensing businesses, Huawei share losses would probably be a near-term positive. Huawei relies far less on Qualcomm's processors and modems than many of its rivals, and Qualcomm and Huawei remain in a licensing dispute that has led Huawei to halt its royalty payments to Qualcomm.
That said, Huawei's U.S. chip suppliers in general can't be thrilled that the export restrictions are motivating Huawei (via its HiSilicon chip unit, while relies on Taiwan Semiconductor (TSM) for manufacturing) to step up its development of chips that can replace U.S.-designed products. While replacing American silicon will be easier said than done in some areas, there's no denying that HiSilicon's chip R&D work is now quite extensive. And it wouldn't be surprising if in time, large Chinese OEMs other than Huawei become (perhaps at Beijing's urging) major buyers of HiSilicon's chips.
And needless to say, at a time when so many chip stocks are staring at massive 12-month gains, markets aren't thrilled about getting a fresh dose of Huawei-related uncertainty -- even if the damage for many suppliers is unlikely to be massive.
