In a surprising turn of events, the launch of Huawei Technologies’ first 5G-capable smartphone in years has led to a significant surge in the stock prices of its tech suppliers. This comes despite the U.S. clampdown on the Chinese tech giant.
A Resounding Market Response
Following the release of the Mate 60 Pro in late August, several tech suppliers associated with Huawei witnessed a sharp increase in their share prices. Some, like Dongguan Chitwing Tech, saw their stock value skyrocket by as much as 420% in just a month. This firm indirectly supplies precision molds and structural components to Huawei. However, the Shenzhen Stock Exchange prompted the company to clarify that Huawei’s contribution to its revenue was a mere 3.7% in the first half of the year.
Other beneficiaries of the Huawei bump include Hwa Create, a satellite communication component provider, whose shares leaped by over 143%. Shenzhen Phoenix Telecom Technology and Seres Group also enjoyed stock price hikes of 83% and 65%, respectively.
China’s Push for Tech Self-Reliance
The stock market’s positive response is not just a reflection of Huawei’s potential comeback in the smartphone arena. It also underscores China’s broader ambitions to establish a self-sufficient tech supply chain. This is particularly significant given the ongoing downturn in the global tech industry.
However, the recent success of Huawei’s suppliers stands in contrast to the slump many of them experienced since 2021. For instance, Sunwanda’s share price remains below a third of its peak in late 2021.
The Road Ahead
Jeff Pu of Haitou Securities highlighted that the demand for Huawei’s handsets currently outstrips supply. He predicts that Huawei’s resurgence in the domestic smartphone market will continue into the next year, benefiting its key suppliers. However, this could pose challenges for other handset makers in China, including Apple and Xiaomi.
Edison Lee of Jefferies anticipates Huawei’s capacity for 7-nanometer chips to grow steadily, enabling the company to reclaim market share from Apple’s iPhone in China. However, Mike Leung of Wocom Securities cautions investors, suggesting that the current rally might be short-lived, especially with rumors of the U.S. considering further sanctions in light of the Mate 60 Pro’s success.
In conclusion, while Huawei’s recent launch has provided a temporary boost to its suppliers, the long-term outlook remains uncertain, especially with potential geopolitical challenges on the horizon.
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