Move by Google to ban Huawei likely to have ‘a negative effect’, say Momentum securities analysts


JOHANNESBURG, May 21 – Momentum security analysts agree that the recent move by Google to ban Huawei from the Android platform is likely to have a “negative effect on the company”.

Equity analyst at momentum securities, Nancy Bambo, said the move by Google will see Huawei lose some customers.

“Huawei is not listed, and the shares are owned by the employees. That said, there may be a slight buffer of customer retention given the roll-out of Huawei phones using its own operating system should the ban persist,” Bambo said

“Further customers may be lost should other countries follow the US’ decision to not use Huawei products in their networks (so far Australia, New Zealand and Japan have banned Huawei usage on their networks).”

Bambo said 48% of Huawei’s revenue comes from the consumer which is the segment likely to be most affected by the US ban.

“It’s hard to tell whether Huawei’s counteracts will be successful as it ultimately depends on customer satisfaction regarding the product offering,” Bambo said

“In anticipation of the US ban, Huawei had already developed its own operating system, and sources only 17% of its smartphone chips from Qualcomm, (73% from Huawei and 10% from a Taiwanese firm MediaTek).”

When asked if similar impacts will be seen on other Chinese tech companies and which ones, Bambo said that six other tech-related Chinese firms have been banned from “exporting sensitive US goods, with fears they may have supported Iran’s military”, all of which were unlisted.

Speaking from a technical perspective, Ernie Gruhn, a technical analyst at Momentum Securities, said: “The Nasdaq China Index (Nqcn) shows clear technical weakness in recent weeks as the technology index has shed 12% with trend technical metrics strongly indicative of selling pressure in the Chinese technology sector.”

Gruhn said that a continuation of the technology “spat” would substantially increase the likelihood of NQCN trading below the lows of the year.

Frank Kahumba, equity analyst at Momentum Securities, said that with android having a lot of enthusiasts due to the Operating System (O.S) across devices it could be a huge blow if this is lost.

“Huawei relies heavily on Android for its O.S and will have to replicate what they are doing in China, given certain costs. Phone manufacturer “Xiaomi” is doing things differently,” Kahumba said

“The trade war is the base of this break up, and could allow Apple to regain some market share which was taken by Huawei and other flagship killers.”

However, Kahumba said that consumers won’t be hot too hard since they have more options to choose from other than the flagships (Apple and Samsung) like Xioami and OnePlus.

“Huawei P30 pro and OnePlus 7 pro have brought flagship level specs and experiences to the market at a lower price point, increasing the competition for smartphones,” said Kahumba.

– African News Agency (ANA)