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MarketScreener Homepage  >  Equities  >  SHENZHEN STOCK EXCHANGE  >  ZTE Corporation    000063   CNE000000TK5

ZTE CORPORATION

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The U.S. vs. China: The High Cost of the -2-

10/22/2020 | 04:26pm EST

The Rural Wireless Association says some rural carriers have been unable to repair some network equipment made by Huawei or ZTE because they ran out of spare parts, which in one case has left parts of Montana without wireless service, including the ability to make 911 calls. Both the trade group and some Trump administration officials are urging the Senate to finalize the reimbursement funds so its members can start the multiyear process of replacing Chinese equipment.

Semiconductors

U.S. semiconductor companies that want to sell certain products to China must apply for permission to export from the Commerce Department, which said it would issue licenses for exports that don't impact national security. The semiconductor industry is asking the government to increase the consistency and transparency of the license-approval process, saying U.S. companies are losing sales.

In 2018, the U.S. semiconductor industry had $226 billion in revenue and 48% of the global market, according to a Boston Consulting Group report from March commissioned by the U.S. Semiconductor Industry Association. Both figures were expected to decline in coming years because of China's growing competitiveness, but U.S. export controls could make that decline steeper and faster.

The report estimated those figures would fall to $190 billion in revenue and 40% market share within three years under existing conditions. If U.S.-China tensions escalate and Washington completely bans U.S. chip exports to China -- or if Beijing ousts U.S. companies from its market -- then those figures would plunge to $143 billion and 30%, putting China and South Korea in place to lead the global industry. That would be a 37% decline in revenue from 2018.

The upshot, say U.S. semiconductor industry leaders, is that sales that would have gone to American chip makers would go to foreign ones instead, resulting in less money for research and development in an industry that American leaders want to be globally dominant -- because advanced chips are needed to maintain an edge in military and commercial technology.

Though the Commerce Department has granted some U.S. chip makers licenses to continue selling to Huawei and other Chinese companies, many chip executives say the current limits aren't well thought out. The report commissioned by the SIA says 73% of products from U.S. chip companies are essentially commodities that Chinese companies can easily obtain from non-U.S. companies. The group argues that some of the remaining 27% poses no national-security risk, like chips for wearable fitness trackers.

"The best way to tackle this issue is for the U.S. to take a surgical approach to technology restrictions that address clearly defined national-security concerns and avoid unintended harm to U.S. semiconductor leadership," says John Neuffer, the SIA's chief executive.

A senior U.S. official says the goal with the export controls was to figure out what exactly American companies were selling to China -- which the Commerce Department can do because it's reviewing many sales. The official says the department might eventually grant licenses to most American companies that want to sell to China, after reviewing everything on a case-by-case basis, but also acknowledges that chip companies are frustrated that license applications aren't being reviewed at a quicker pace.

"The Commerce Department takes great care to ensure that regulations do not impose unreasonable restrictions on legitimate international commercial activity, and strives to avoid actions that compromise the international competitiveness of U.S. industry without any appreciable national-security benefits," Commerce Secretary Wilbur Ross said in a statement.

But the U.S. actions so far may be indirectly driving away some business. Jake Parker, senior vice president of the U.S.-China Business Council, which represents American companies doing business in China, says he has been told of one Japanese company urging Chinese companies to switch from their U.S. suppliers. The message, he says, is: "You can't rely on U.S. technology because you might be cut off from it in the future."

At the same time, the export controls affect some foreign semiconductor companies, because they use U.S. technology in making components they sell to Huawei and other companies. Japanese semiconductor maker Kioxia Holdings Corp. last month called off what was expected to be one of the year's biggest initial public offerings after saying U.S. export restrictions on Huawei were hurting business.

Mr. Woo is a Wall Street Journal reporter based in San Francisco. He can be reached at stu.woo@wsj.com.

(END) Dow Jones Newswires

10-22-20 1625ET

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 1.16% 115.17 Delayed Quote.55.08%
BT GROUP PLC 1.40% 127.2 Delayed Quote.-34.91%
ERICSSON AB -0.24% 104.9 Delayed Quote.28.25%
NOKIA OYJ 0.59% 3.401 Delayed Quote.3.16%
QUALCOMM INCORPORATED 1.47% 145.93 Delayed Quote.63.01%
SAMSUNG ELECTRONICS CO., LTD. 0.30% 67700 End-of-day quote.21.33%
ZTE CORPORATION 2.32% 36.58 End-of-day quote.3.36%
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Financials
Sales 2020 101 B 15 343 M 15 343 M
Net income 2020 4 452 M 676 M 676 M
Net cash 2020 4 866 M 739 M 739 M
P/E ratio 2020 38,2x
Yield 2020 0,62%
Capitalization 155 B 23 480 M 23 514 M
EV / Sales 2020 1,48x
EV / Sales 2021 1,28x
Nbr of Employees 70 066
Free-Float 71,4%
Chart ZTE CORPORATION
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ZTE Corporation Technical Analysis Chart | 000063 | CNE000000TK5 | MarketScreener
Technical analysis trends ZTE CORPORATION
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 40,34 CNY
Last Close Price 36,58 CNY
Spread / Highest target 35,3%
Spread / Average Target 10,3%
Spread / Lowest Target -27,6%
EPS Revisions
Managers
NameTitle
Zi Yang Xu President, CEO & Executive Director
Da Xiong Xie Chairman-Supervisory Board
Zi Xue Li Chairman
Li Ying Chief Financial Officer & Executive Vice President
Jun Feng Wang Member-Supervisory Board
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