Samsung Electronics and companies that have shifted production to Southeast Asia will likely emerge as beneficiaries of the Sino-American trade war in 2019, market players told Nikkei in a survey.
The tensions that escalated in 2018 are likely to continue reverberating, they said. Many cited non-Chinese telecommunications players as companies to watch.
With the U.S. increasingly alarmed by the rise of Chinese enterprises and their associated security risks, Samsung stands to benefit from moves by Washington and others to shut out products from Chinese telecom companies.
In the emerging field of fifth-generation wireless technology, “the fact that the U.S. and countries close to it are banning base stations made by Huawei Technologies will work in Samsung’s favor,” predicted analyst Kim Yong-woo of Seoul-based SK Securities.
Samsung supplies telecom equipment to top American carrier Verizon Communications, which launched 5G service in 2018, and anticipates orders from outside the U.S. as well.
“Sales in Samsung’s network business, which centers on base stations, will likely reach at least 4 trillion won [$3.58 billion], double 2017 levels,” Kim said.
2018 saw the U.S. impose punitive additional tariffs on USD 250 billion of items from China, or roughly half of annual total goods imports from the country. Washington looks likely to raise tariff rates or expand the scope of the duties. It could choose to do both as it seeks a fundamental overhaul of Chinese trade practices, such as forced technology transfers and intellectual property infringement.
Charles Hsiao, chairman of Taiwan’s Fubon Securities Investment Services, predicts that many Taiwanese contract manufacturers will be impacted. “Taiwan’s contract manufacturers make products such as personal computers and smartphones in China and export them to the U.S. They won’t be able to escape damage,” he said.
Hon Hai Precision Industry, or Foxconn Technology, Compal Electronics and Quanta Computer are in this group.
Carmen Lee, head of research at Singapore’s OCBC Investment Research, said Chinese companies in industries heavily reliant on exports to the U.S., such as textiles and electronics, could suffer a major blow.
Paul Kitney, chief equity strategist for Asia-Pacific Research at Daiwa Capital Markets Hong Kong, said telecom equipment maker ZTE and the TCL electronics-making group are likely to face difficulties in 2019. He also flagged Li & Fung, a Hong Kong-based trading house that handles clothing and household articles, as another potential casualty.
Textile makers that have relocated their manufacturing operations to Southeast Asia, meanwhile, are unlikely to be greatly affected, said Fubon Securities’ Hsiao.
One of these is Taiwanese apparel maker Eclat Textile, which pulled the plug on China-based factories at the end of 2016 due to wage hikes, shifting to Vietnam and other Southeast Asian countries. The supplier to Nike, Adidas and Under Armour is busy dealing with inquiries from clients wishing to avoid trade war risks.― Nikkei Asian Review