The ongoing US-China trade war is turning out to be really ugly for tech companies. No matter how big or relevant the company is in tech-industry, the trade war offers them no mercy and no one is spared. We can see now that there are no winners in this trade war and their effects go out to other countries as well. With the banning of Huawei from doing business in the US, other tech-related businesses and companies are being affected too, here’s how.
Lowered Market Shares
For tech companies reliant in China for their production and supply chain, market shares will definitely plummet. Take Apple for instance, which recently lost $75 B in market value. Apple relies on China for its manufacturing plants and other raw materials; not to mention that China is a very big market accounting for most of its sales.
Other companies like Tesla and Qualcomm are also directly affected because most of their materials and components used in their products are sourced in China. Higher tariffs mean that the cost will be passed on to their consumers.
China is a huge contributor to the development of US semiconductors and technology hardware. Back in 2017, China invested $ 1.03 B on these industries. Last year, this went down to a measly $203.4 M. Coupled with higher tariffs as well, we can expect that development in this sector will lag or become fragmented; With development lagging behind, not only the US will suffer. We may see a bigger divide coming between Silicon Valley and Shenzhen. And once again, since many of our devices and computers are powered with these semiconductors, we can expect that the costs will we passed on to consumers.
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Another development related aspect is that with US closing its doors on China, China will now have to look to other regions for trading partners. An effect is of this trade war is that Chinese deals and investments in Europe are starting to go up. The US has always been the leading country when it comes to technology but current situations may upend this situation. There are still other parts of the world where China can focus their trading and partnerships.
Electronics manufacturers like NVIDIA are suffering huge losses due to this trade war, with the US government restricting their transactions with Chinese companies. Back in 2018, 20% of Apple’s revenue is from China. Other companies with China as a huge sales contributor are also expected to suffer severely.
What Can We Expect
With two of the most powerful economies tearing each other down with mountain-high tariffs and quotas, the tech industry is a definite victim. While the trade war the US waged against China could potentially benefit the country for a bit, the long-term effects in the tech industry are just unimaginably bad. China is now one of the major superpowers in the world and when it comes to technological capacity, it has already gained critical mass. Gone were the days when China was just merely an imitator; They have now become innovators.
While it may hurt China’s economic growth for a while, it will not be derailed. The US, on the other hand, must ensure that checks and balances are in place to prevent further damage from escalating; Not just with China but with the rest of the world.