Sino-US World Trade War, ZTE’s ban on sale is hard to live

Since US President Trump announced on March 23 that punitive tariffs on various Chinese commodities have been imposed, Sino-US trade frictions have lasted for 27 days.

On the evening of April 16, the US Department of Commerce issued a notice stating that the US government prohibited ZTE from purchasing sensitive products from US companies, claiming that ZTE had made false statements to US officials.

In response, the spokesperson of the Ministry of Commerce should make a statement and said that the Ministry of Commerce will pay close attention to the development of the situation and be ready to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.

Yesterday, the Shenzhen Stock Exchange issued a notice saying that the stock was suspended since the market opened on April 17 due to a major event that ZTE may have a large impact on the stock price and has not publicly disclosed.

On the morning of April 17, the Ministry of Commerce issued Announcement No. 38 of 2018, which decided to implement temporary anti-dumping measures against imported sorghum originating in the United States.

On April 16th, the US Department of Commerce issued an export ban on ZTE. Until March 13, 2025, US companies will be banned from selling parts, goods, software and technology to ZTE.

In response to the US Department of Commerce's announcement of export control measures for ZTE, a spokesperson for the Ministry of Commerce said that China has consistently required Chinese companies to abide by the host country's legal policies and operate legally and compliantly in the course of overseas operations. ZTE has conducted extensive trade and investment cooperation with hundreds of American companies and has contributed tens of thousands of jobs to the United States. It is hoped that the US will properly handle it according to laws and regulations, and create a fair, equitable and stable legal and policy environment for enterprises.

In recent years, ZTE and Huawei have repeatedly suffered setbacks in the United States. Earlier this year, Texas Republican Mike Conaway filed a new bill calling on the US Congress to issue an injunction prohibiting US government agencies from working with service providers that are using Huawei or ZTE equipment and claiming that the ban is Maintain US national security.

Huawei originally expected to enter the US market in cooperation with AT&T in 2018. This agreement also failed due to the obstruction of the US government. Some analysts said that from other foreign communication vendors, such as Ericsson, Sony and other communications equipment sold in the United States for many years, in addition to the US government's great prejudice against Chinese companies entering the US market, perhaps China's communications companies in 5G communication technology Constantly increasing influence is the main reason for being rejected.

On the second day after the United States announced the export control of China's telecommunications companies, on April 17, the Ministry of Commerce issued the 38th Announcement No. 38 of 2018, promulgating the preliminary ruling on the anti-dumping investigation of imported sorghum originating in the United States, and decided to originate The US import sorghum implemented temporary anti-dumping measures.

The Ministry of Commerce ruled that the import sorghum originating in the United States was dumped, the domestic sorghum industry suffered substantial damage, and there was a causal relationship between dumping and substantial damage, and decided to implement temporary anti-dumping measures against imported sorghum originating in the United States. According to the ruling, since April 18, 2018, when importing importers of imported sorghum originating in the United States, importers should provide corresponding deposits to the Customs of the People's Republic of China according to the company's margin ratio (178.6%) determined by the ruling.

Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce, analyzed that Trump’s “trade friction” against China was mainly aimed at high-tech fields, which is a pain point for China. At present, China is the second largest consumer of American agricultural products, second only to Canada. However, anti-dumping is not carried out on agricultural products such as sorghum because of trade friction. On February 4 this year, the Ministry of Commerce announced that it initiated an anti-dumping and subsidy investigation on US imports of sorghum.

According to the Ministry of Commerce’s previous announcement, imported sorghum originating in the United States is exported to China at a price lower than the normal value, and there is a large amount of dumping. The increase in the number of US sorghums entering China and the continuous decline in prices have caused suppression of similar products in China's domestic market, which has caused substantial damage and threats to domestic industries. Therefore, it was decided to investigate the case.

The Beijing News reporter learned that as domestic corn prices have risen significantly since the end of last year, domestic feed producers have increased their imports of cereals to the United States. Customs statistics show that in 2017, China imported a total of 4.8 million tons of sorghum from the United States, worth about 1 billion US dollars, almost all of China's food imports last year. In the first two months of this year, the scale of imported sorghum decreased by 11% year-on-year due to factors such as rising trade friction.

Zhao Ping, director of the International Trade Research Department of the China Council for the Promotion of International Trade, analyzes the products exported by the United States to China. “China is either its largest single market or its main market.” Among its exports, China accounts for a large proportion of its exports. huge.

According to data from the US Grains Council, a US food export industry organization, more than three-quarters of the US export sorghum is sold to China.

From March 23, US President Trump officially announced the punitive tariff trade friction of up to 60 billion US dollars on various Chinese commodities. The Sino-US trade friction has lasted 27 days. During this period, the two sides conducted a multi-round "confrontation". With the escalation of friction, the current sanctions list has expanded and has affected many industries in both countries.

On April 3rd, the US Trade Representative announced the taxation proposal for the China 301 investigation and publicly solicited opinions. The list of recommended taxable products will cover approximately $50 billion in exports, with a proposed tax rate of 25%, covering approximately 1,300 taxable products, covering aerospace, information and communication technology, robotics and machinery.

On the afternoon of April 4, the Ministry of Commerce of the People's Republic of China issued an announcement announcing that tariffs will be imposed on imported products such as soybeans and other agricultural products, automobiles, chemicals, and aircraft originating in the United States, with a tax rate of 25%, involving 2017 in China. The amount imported from the United States is about 50 billion US dollars.

Then on April 6, the US side announced that it would consider it appropriate to impose tariffs on the additional $100 billion in goods imported from China.

According to the statistics of the reporter, as of yesterday, the product categories involved in trade friction between China and the United States include imported steel, aluminum products, information technology, aerospace equipment, new energy equipment, high-speed rail equipment, biomedicine, robotics and machinery products, soybeans, fresh fruits. Dozens of categories such as dried fruit, nuts, wine, seamless steel tubes, imported cars, pork and products, recycled aluminum, and modified ethanol.

Ministry of Foreign Affairs

If the United States is willful, the Chinese will surely

At the regular press conference of the Chinese Ministry of Foreign Affairs on April 17, spokesperson Hua Chunying said that China and the United States will closely monitor the development of the situation and are ready to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises. The US is willful and will continue to move against the trend. We will be ready to wait and resolutely to win the battle against multilateralism and free trade. This is not only to safeguard China’s legitimate rights and interests, but also to safeguard the rules of the world’s multilateral trading system. ."

Hua Chunying said that regarding the Sino-US economic and trade friction caused by the US 301 investigation, we have clearly and clearly stated the Chinese position. The US behavior is typical of unilateralism and naked economic hegemony. Both China and the United States are world powers, and the economy is deeply integrated. They should respect each other, treat each other as equals, and achieve win-win cooperation.

Sino-US trade friction is hard to beat the Chinese economy

Chinese National Bureau of Statistics (NBS) officials said on Tuesday that trade frictions between China and the United States will not hinder China's economic stability and recovery. Xing Zhihong, spokesperson for the National Bureau of Statistics, said at the press conference on the operation of the national economy in the first quarter of this year that the trend of healthy health in the world's second largest economy will not change due to friction.

Xing Zhihong believes that China's current economic stability is good, China's economic stability, coordination, sustainability, economic resilience, potential, and room for maneuver, Sino-US trade frictions can not fail the Chinese economy, can not change the Chinese economy A good momentum of sustained and healthy development.

“At the same time, supply-side structural reforms and innovation activities have improved China’s economic stability and risk-resistance capabilities, and China has the ability to respond to risks and challenges in order to maintain sustained and healthy economic growth.” Xing Zhihong said that consumption is the Chinese economy in the past five years. The main driver of growth has played an important role in sustaining growth and mitigating external influences. “In recent years, China’s trade surplus has continued to shrink and import growth has accelerated, reflecting strong domestic demand.”

●Industry

Qualcomm is the core player of chips used in mobile phones and communication devices.

On the evening of April 16, the US Department of Commerce announced that it would ban US companies from selling parts to ZTE. The ban took effect immediately and lasted for seven years. It is alleged that the US Department of Commerce has determined that ZTE made a false statement between 2016 and 2017, involving “the disciplinary action that the company claimed at the time and that it had taken and targeted senior employees.”

ZTE started its business as a communication device and began to enter the field of mobile phone manufacturing in order to expand the market of telecom operators. According to its 2017 annual report, carrier network revenues dominated by communications equipment accounted for 58.6% of total revenue, while consumer services dominated by mobile phone business accounted for 32.4%.

Among them, the main demand for the chip in the mobile phone business is the AP processor, and the mobile phone and the communication device have a common demand for the LTE base. From the perspective of third-party reports, the core players in this market are Qualcomm, and Qualcomm maintains its leading position in terms of market share.

Strategy AnalyTIcs two reports show that in the first half of 2017, the smartphone application processor market, Qualcomm led MediaTek, Apple, Samsung LSI and Spreadtrum with 42%, and Qualcomm has room for further expansion; 2016 LTE baseband market, Qualcomm Market share reached 50%, followed by MediaTek and Samsung LSI with 24% and 10% respectively.

In other words, at present, ZTE wants to carry out two core businesses, which are inseparable from Qualcomm's product supply. At present, domestic manufacturers are not able to eat all of their orders.

Coreless pain, how big is the ZTE product line to the United States?

China's electronics industry still has no core pain. The electronic research team of China Merchants Securities pointed out that ZTE's main business includes base stations, optical communications and mobile phones. Among them, some RF devices in the base station, such as cavity filters, optical module manufacturers, and structural components in mobile phones, can basically meet the self-sufficiency requirements. Only chips have a certain degree of self-sufficiency in the three major application areas. Among the three application areas of ZTE, the highest chip threshold is the RRU base station. In this field, it takes a long time to achieve domestic replacement.

Gu Wenjun, chief analyst of Xinmou Consulting, said that this has a major impact on ZTE. Although it also wants to take back ZTE Microelectronics, it is difficult to change the status quo within two years, that is, relying entirely on imports.

Gu Wenjun once analyzed in his article that the seemingly huge Chinese electronics industry is at the bottom of the industrial chain. Even though ZTE has more patents, most of the main chips and components are from American manufacturers. According to the article, ZTE has dozens of US chip suppliers in the field of chips only (not including a large number of components), and even more deadly, in almost all product areas of ZTE, almost all subdivisions. There are US chips in the links, and there are very few domestic chips.

CICC analysts analyzed this, and the direct impact of ZTE has two, communication equipment and mobile phones. Among the core components of communication equipment, 100% of the base station components are from US companies; ZTE has 1-2 months of stocking, and if it does not reach a settlement within this time, it will affect the production of ZTE equipment. This will have an impact on the telecommunications industry, especially the construction of Chinese operator networks, affecting the future 5G construction.

In ZTE's revenue structure, the carrier network accounted for 58.62%.

CITIC Securities believes that the short-term impact is significant. Because ZTE's baseband chips, RF chips, storage, and most of the optical components are from the United States, the impact will be significant in the short term. The delivery of existing orders and the new acquisition of orders will be greatly affected. It is expected that the delivery and payment will be affected. Whether the penalty on the customer side will be delayed due to the delayed delivery will be judged based on the further information disclosed.

ZTE issued an internal letter saying that the US Department of Commerce activated the refusal order for the company, and the company attached great importance to it. The crisis response team was established at the first time. At present, all areas of the company are analyzing and formulating countermeasures, and go all out to face the crisis.

How should ZTE "demolition"?

After the incident, ZTE announced on the official Weibo that the company had been informed of the US Department of Commerce's refusal to activate the company. The company is fully assessing the impact this event has on the company and actively communicating and responding to all aspects.

In this regard, Gu Wenjun analyzed that the incident was a case in a special context. The so-called special background is Sino-US trade friction. At this stage, both China and the United States are looking for chips to be dealt, and any possibility may occur, and ZTE may be Grabbed the handle. This matter may eventually continue to be resolved through negotiations and will not be expanded for the time being.

From this point of view, Gu Wenjun said that the first thing ZTE wants to do is to prove that the reasons for the United States are not established, see the move, and the second step depends on the communication of the Ministry of Commerce. In the end, ZTE may make some concessions, similar to the last time it accepted the fine, because there is no bargaining chip in hand.

Communication expert Liu Qicheng believes that "ZTE can only respond passively. In the context of trade friction, ZTE counts how much inventory there is, how much impact it has on the next supply, and how long the impact cycle is. Communicate with other component manufacturers. Is there a product that can be replaced?"

Communication expert Fu Liang told reporters that what ZTE is going to do now is to actively communicate and try to let the US government cancel or reduce these penalties. Such operations are also unfavorable to the United States, and are unfavorable to many US suppliers, affecting not only ZTE, but also the employment of the United States itself.

In recent years, Chinese companies have become more and more popular in the sea. The experience of ZTE in the United States has great reference for Chinese companies. In the overseas development of Chinese enterprises, they must follow the principle of international formulation. In this Iranian incident, ZTE did not particularly think clearly, and finally caused more serious consequences. Wang Shuyi, a semiconductor industry analyst, told reporters that if it is really fully implemented, ZTE should not be able to support it for three months. "Because some core things are not yet replaceable in China."

The list of ZTE's upstream suppliers in China by CITIC Securities Research shows that there are three main types of upstream US companies that supply ZTE, namely terminals, main equipment and servers, optical devices, and a total of 14 companies.

Affected by this news, Qualcomm, Micron, Broadcom, Intel, and Oracel companies are not significantly affected by the stock price fluctuations due to the low proportion of ZTE's purchases. On April 16, Qualcomm fell 1.72%, Micron fell 1.11%, Broadcom rose 0.98%, Intel rose 1.04%, and Oracel rose 0.35%.

According to relevant media reports, 30% of ACIA's shipments were purchased by ZTE, ACIA shares plunged 35.97%, Oclaro fell 15.18%, Lumentum fell 9.06%, and fabrinet fell 9.81%.

Previously, ZTE said it will focus on 5G end-to-end solutions, and it is expected that 5G commercial mobile terminals will be released by the end of 2018 or early 2019.

The straight flush shows that the 5G concept index fell yesterday, down 3.12%. At the same time, domestic chip concept stocks rose by nearly 30%.

Analysts from CICC pointed out that semiconductors are a relatively global industry. If they are directly restricted to mainland semiconductors, they will be very large for the global industrial chain.

In fact, the US move not only affects ZTE, but also to some extent, it is not good news for American companies. Wang Shuyi, a semiconductor industry analyst, pointed out that "the United States can cut off its supply in the industry chain and force you to comply with their regulations by breaking the supply. If the United States does this, it will force domestic companies to find domestic manufacturers to make domestic substitutes. In the long run, It may not be a good thing for them."

Gu Wenjun said that no country in today's semiconductor industry can independently develop the chip industry 100%, even the United States can not, the United States does not have the production of lithography machines, but also depends on imports.

Early morning on March 23

US President Trump officially announced a punitive tariff of up to $60 billion on various Chinese commodities.

March 23

The Ministry of Commerce issued a list of discontinued products for the US import of steel and aluminum 232 measures, and sought public comments.

March 29

The Chinese side informed the WTO of the suspension of the concession list and decided to impose tariffs on some products imported from the United States to balance the loss of profits caused by the US 232 measures.

Late night on April 1

China announced a 15% or 25% tariff on 128 products imported from the United States.

April 2

The Customs Tariff Commission of the State Council has decided to impose a 15% or 25% tariff on 128 products imported from the United States from April 2, 2018.

April 3

The US trade representative announced the taxation proposal for the China 301 investigation and publicly solicited opinions. The list of recommended taxable products will cover approximately US$50 billion in exports from China, with a proposed tax rate of 25%, covering approximately 1,300 taxable products.

April 4th

The Ministry of Commerce of the People's Republic of China issued an announcement announcing that tariffs will be imposed on imported products such as soybeans and other agricultural products, automobiles, chemicals, and aircraft originating in the United States, with a tax rate of 25%, involving approximately 500 US imports from the United States in 2017. One hundred million U.S. dollars.

April 6

US President Trump said that in view of "China's unfair counterattack", he has instructed the Office of the US Trade Representative to consider whether it is appropriate to impose tariffs on the additional $100 billion of goods imported from China based on the "301 investigation."

8 pm on April 6

The Ministry of Commerce held a press conference. If the US announces a list of 100 billion taxable products, the Chinese side is fully prepared and will not hesitate to immediately counterattack. We do not rule out any options.

April 11

Trump stated: I will not call it a trade war because it is really a trade negotiation. If China is willing to open its market to US products further, the two countries will have the ability to avoid trade wars.

April 12

The spokesman of the Ministry of Commerce said that he hopes that some people in the US will not misjudge the situation, advise the US side, recognize the general trend of the world, and do not "go black on one road."

April 16

The US Department of Commerce issued a statement saying that the US government banned ZTE from purchasing sensitive products from US companies, claiming that ZTE had made false statements to US officials.

April 17

The Ministry of Commerce issued an announcement to implement temporary anti-dumping measures against imported sorghum originating in the United States

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