U.S. companies were selling $11 billion a year of parts to Huawei before the blockade. Losing those sales is just the start of the damage. Every other Chinese and Russian company is making sure to find non-US suppliers. The U.S. has threatened India and Turkey with sanctions as well.
As other companies replace US components, the impact will be tens of billions more than the $11 billion of Huawei suppliers. Redesigning mobile phones and other products can take from three months to three years, so sales will be lost over time.
The relative decline in sales at Qualcomm and Broadcom suggests they are seeing other customers are cutting back, not just Huawei. That isn’t certain yet, however.
European companies are considering similar self-protection. A very senior German engineer tells me German companies in automotive and electronics are also designing out components only available from the US. Given how few electronic products are produced and manufactured in the US, the ultimate impact can be huge.
No company is more vulnerable than Google. 90% of Google’s income is from advertising, much of it dependent on YouTube and Gmail. Huawei Harmony is ready to replace Android, although it has some rough edges. Android has an obsolete file system that wasn’t designed for a mobile phone. Huawei’s F2FS file system replacement is 60% faster. (While the file system is faster, the press reports that Hong Meng/Harmony is 60% faster overall were misinterpretations.)
Huawei is now making most RF parts and sourcing others in Asia
Huawei has replaced all but two components in the radio frequency front end with Asian parts. After satisfying Huawei’s needs, these vendors will inevitably win other contracts away from Broadcom, Skyworks, and other US parts makers.
Huawei’s HiSilicon remains primarily a supplier to the parent company but also sell parts to others. For example, it is now selling its 4G IoT chip. If HiSilicon sold other mobile manufactures RF parts to replace US company’s RF parts, it could make some money. The government would be happy because it would reduce the semiconductor trade deficit.
Broadcom, Qualcomm, and others will undoubtedly lose some future sales to newly emerging suppliers. China has engineers who design state-of-the-art RF components for military and aerospace. Chinese academics are doing important RF research. The capability is there.
China is already investing over US$100 billion for domestic memory chip manufacturing. The government is ready to fund other components, including RF.
What percentage of sales and value could disappear?
Qualcomm, Broadcom, Skyworks, Qorvo, and other companies directly affected have a market value of half a trillion dollars. Reduced sales to China would have a large effect. 20% of half a trillion is far more than any previous estimate of the cost of blockading Huawei.
An estimate like that is hard to believe but not unreasonable.