Shares of U.S. technology companies including Alphabet-owned Google and Xilinx Inc. fell Monday as those companies said they have begun to comply with the White House’s order barring them from selling equipment to Chinese telecommunications giant Huawei Technologies Inc.
Google (NAS:GOOGL) revoked Huawei’s Android license, Reuters reported on Sunday, a move that could cripple the Chinese tech giant’s smartphone business. Huawei is one of many smartphone makers world-wide that rely on Google’s Android operating system. Shares of Alphabet fell more than 1% as trade worries took a toll on the larger market, particularly tech.
“We are complying with the order and reviewing the implications. For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices,” a company spokesman said in response to questions via email, but would not offer any further details.
Last week, the Trump administration moved to restrict U.S. technology sales to Huawei and certain other foreign-owned companies. The U.S. has long claimed that telecom equipment from Huawei poses a national security risk.
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Huawei will be restricted to using only the public, open-source version of Google’s Android, Reuters said. Effectively, the restriction means that Huawei will be immediately cut off from receiving Android system updates, including security updates. Future versions of Huawei smartphones won’t be able to use YouTube, Gmail and the Google Play store, among other features.
The chip sector, meanwhile, was a sea of losses in the U.S. and elsewhere as several companies that do business with Huawei found themselves in the crosshairs of an increasingly fraught trade spat between the U.S. and China.
“Reports that Google has barred Huawei, the world’s second biggest smartphone maker, from software updates to its operating system comes as a major blow to the Chinese company and it would not be at all surprising to see some retaliation from Beijing as this tit for tat trade war threatens to escalate further,” said David Cheetham, chief market analyst at XTB online trading, in a note to clients.
Chip companies fall in line?
Bloomberg News reported Sunday that Xilinx (NAS:XLNX) and other U.S. chip makers, including Intel Corp. (NAS:INTC) , Qualcomm Corp. (NAS:QCOM) and Broadcom Inc. (NAS:AVGO) have frozen the supply of critical software and hardware components to Huawei.
“We are aware of the Denial Order issued by the U.S. Department of Commerce with respect to Huawei, and we are cooperating. We have no additional information to share at this time,” a Xilinx spokesperson told MarketWatch via email. The other companies mentioned did not immediately respond to requests by MarketWatch for comment.
Xilinx shares fell more than 5% in morning trading, while Broadcom dropped 4% and Intel fell more than 1%.
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Also under pressure German chip maker Infineon Technologies AG (FRA:DE:IFX) (FRA:DE:IFX) fell 4.6% in Frankfurt after a report in the Nikkei Asian Review said the company had suspended shipments to Huawei. Gregor Rodehueser, Infineon spokesman, told MarketWatch in an email that he could not confirm that report, but that the company was abiding with U.S. restrictions.
“In any market where Infineon operates, we fully comply with all applicable legal requirements, laws and regulations,” said Gregor Rodehueser, Infineon spokesman. He said due to the U.S. ban, “certain compliance measures are required to enter into force, according to which the delivery of goods originating in the U.S. have to be terminated by Infineon.”
Still, he said, “the great majority” of products Infineon delivers to Huawei are “not subject to U.S. export control law restrictions, therefore those shipments will continue.”
MarketWatch reached out to Huawei for comment, but the company has yet to respond. Last week, the company criticized the U.S. move as being “in no one’s interest.”
“It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain,” the company said.