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US allows sales of chips to Huawei’s non-5G businesses

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The US is allowing a growing number of chip companies to supply Huawei with components as long as these are not used for its 5G business, people briefed by Washington said, in a potential lifeline for the Chinese group.

Analysts believe this could mean that tough US sanctions this year against China’s leading technology group could be less threatening to its overall business than previously thought. While the sanctions would still pose a grave challenge to Huawei’s 5G business, the company’s important smartphone arm might have a chance to recover.

The US Department of Commerce “has been telling companies in recent conversations that while licences to supply Huawei are handled with a view to denial, this can be overcome if you can demonstrate that your technology does not support 5G”, said a semiconductor executive involved in dialogue with the department, referring to the cutting-edge telecoms infrastructure.

Executives at two Asian semiconductor companies said they were optimistic that their applications for licences to resume shipments to Huawei would be approved. “It has been indicated to us that chips for mobile devices are not a problem,” said one of them.

Washington barred companies worldwide from manufacturing for or selling to the Chinese group components that used US technology, under rules imposed in May and then tightened in August. Given the central role of US technology in the global semiconductor industry, the sanctions threatened to choke off Huawei’s access to chips.

But recently Washington has appeared more willing to permit companies to supply Huawei with components for non-5G uses. The display unit of South Korea’s Samsung Electronics said on Tuesday that it had received a US licence for shipping organic light-emitting diodes, or OLED displays, for handsets to Huawei.

“We believe this is a strong indication the US intends to allow Huawei to stay in the handset business, since, as we have argued, it does not present an obvious national security threat to the US,” wrote Edison Lee, an analyst at Jefferies, in a research note.

Mr Lee said Japan’s Sony and Chinese-owned OmniVision, headquartered in California, had also been granted licences to supply Huawei with CMOS image sensors — chips used in smartphone cameras.

OmniVision did not respond to a request for comment.

At an earnings briefing on Wednesday, Sony declined to comment on whether it had been granted a licence to resume selling its image sensors for use in Huawei smartphones. 

Sony was forced to cut its full-year profit guidance for its image sensor business by 38 per cent after halting its sales to Huawei from September 15. 

The US government, which has argued for more than a decade that Huawei’s telecoms infrastructure equipment could pose a security threat, originally put the Chinese company on a list of entities subject to export controls last year.

In the year that followed, more than 300 companies applied for licences to allow them to continue doing business with Huawei, of which about one-third were granted. US chip companies Intel and AMD were among those that received a licence. Intel has continued to supply Huawei with processors for servers in its cloud computing business.

After a second wave of sanctions was announced in May, Huawei started stockpiling the chips needed to power its telecoms networking gear, such as base stations. Its telecoms infrastructure unit, which builds and manages mobile networks for carriers from China Mobile to Deutsche Telekom, has enough inventory for about two years, according to industry executives.

But Huawei’s consumer business, which accounts for more than half of its revenue, was harder hit. The tougher US restrictions announced in August not only block contract chipmakers from manufacturing the latest smartphone processor designed by Huawei in-house, but also bar vendors such as Taiwan’s MediaTek from selling it off-the-shelf chipsets.

Jefferies’ Mr Lee said if Washington was willing to allow Huawei’s smartphone business to survive, both US chip company Qualcomm and MediaTek could receive licences later this year to resume sales of certain chips needed for smartphones to Huawei.

However, industry experts caution against too high expectations on the matter, pointing to what they say are the Trump administration’s erratic policy decisions.

Additional reporting by Song Jung-a in Seoul



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NYSE to suspend trading of China’s Cnooc next month

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The New York Stock Exchange is to start delisting proceedings against China National Offshore Oil Corporation to comply with an executive order from Donald Trump that bans Americans from investing in companies with ties to the Chinese military.

The NYSE on Friday said it would suspend trading in Cnooc’s American depository shares on March 9, after determining that the company was “no longer suitable for listing” following the order that the former US president signed in November.

The order banned investing in several dozen Chinese groups that were last year put on a Pentagon blacklist of companies that are accused of working with the People’s Liberation Army and threatening US security. Trump set a January 28 deadline for the ban to take effect, but President Joe Biden pushed the deadline back to May 27.

The NYSE move comes as Biden evaluates a number of assertive actions that Trump took against China during his last year in office. The commerce department last year put Cnooc on a separate blacklist — called the “entity list” — that makes it hard for US companies to sell products and technology to the Chinese oil group.

The Biden administration has not made clear whether it intends to keep Trump’s executive order in place. But the new president and his officials have so far adopted a tough stance towards China over everything from its economic “coercion” to concerns about its clampdown on the pro-democracy movement in Hong Kong to the repression of more than 1m Uighur Muslims in the northwestern Chinese province of Xinjiang.

Earlier this month, Biden used his first conversation with Chinese president Xi Jinping since assuming office to raise concerns about Hong Kong and Xinjiang, and aggressive Chinese actions towards Taiwan. Antony Blinken, secretary of state, also described the detention of Uighurs in labour camps as “genocide”.

Jen Psaki, White House press secretary, has said the administration was conducting a number of “complex reviews” of the China actions that Trump took. The former president put dozens of other Chinese companies on the Pentagon and commerce department blacklists, including Huawei, the Chinese telecoms equipment group.



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Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

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The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro 

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7


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Petrobras/Bolsonaro: bossa boots | Financial Times

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“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

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