Sony Corp and Kioxia Holdings Corp are seeking U.S. approval to continue technology supply to Chinese telecom giant Huawei Technologies Co Ltd. Sony is a supplier of some sensor software whereas Kioxia deals in production and supply of memory chips.
If confirmed, the move follows other tech companies such as Intel Corp that recently received licences from U.S. authorities.
— Reuters (@Reuters) October 4, 2020
U.S. China trade rivalry
Though U.S. China indulges in a cold war with each other for decades, the last decade experienced the worse. Practically, both countries have entered into an ‘economic hot war’. According to the recent scenario, these two largest economies have been locked in a trade battle. Both economic giants-imposed hundreds of billions of dollars’ tariffs on one another’s goods.
The U.S. accused China of unfair trade practices and intellectual property theft. On the other hand, there is a strong perception in China that the U.S. is afraid of China’s rise as a global economic power. Economic Uncertainty prevails on world trade horizon because of this rivalry.
Sanctions on Huawei
Last year Trump administration took an extreme step and blacklisted Chinese telecom giant Huawei over security concerns. Without any strong evidence, Washington accused Huawei of being the untrustworthy agent of Beijing and involved in intellectual property theft.
“We don’t want their (Huawei’s) equipment in the United States because they spy on us,”
President Trump in an interview to Fox News stated, “We don’t want their [Huawei’s] equipment in the United States because they spy on us”. He further emphasized, “And any country that uses it, we’re not going to do anything in terms of sharing intelligence.”
The U.S. has been pushing her allies to squeeze out Huawei from the world tech market. To strengthen the argument Washington is consistently propagating that Huawei would transfer customers data to Beijing for espionage.
Most recently, China’s Ministry of Commerce has prepared ‘unreliable entity list’ and designed regulations for these entities. The list contains foreign companies endangers China’s national sovereignty, security and economic interests.
The regulations are announced but the list has not been published yet. The Ministry, in a statement, clearly stated “China would take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies”. Global Times, a Chinese state-owned media outlet, claims that companies like Cisco, Apple, and Qualcomm might be in the list.
The concern of Sony and Kioxia
Huawei is one of the top customers for Sony’s image sensors for smartphones. Kioxia Holdings Corp is the world’s No. 2 maker of flash memory chips and a Huawei supplier. Selling the products to the Chinese telecom giant Huwaei without U.S licenses can cause risk to the earnings of Sony and Kioxia.
Kioxia warned that U.S. curbs on Huawei could trigger memory chip oversupply and lower prices. It is further estimated that the global chip market will face multibillion-dollar loses if U.S-China tension continue.
Negotiations between the two economic giants are ongoing but it’s difficult to predict any immediate positive outcome. In January the two sides signed a preliminary deal but still, some of the major issues remain unresolved.