Impact Of The U.S.-China Trade War On The Performance Of Huawei Suppliers

The U.S.has a long history of antagonism toward Chinese companies like Huawei,especially when it comes to high-tech competition.Trade barriers between countries not only affect the behavior of enterprises,but also restrict the behavior of upstream suppliers.In the two years since January 2018,when the U.S.blocked Huawei's cooperation with AT&T,there have been many vicious incidents against Huawei in the U.S.In May 2019,the U.S.listed Huawei as an entity and banned U.S.suppliers from providing components to Huawei.The incident intensified the conflict between Huawei and the U.S.in the Trade War.It is true that the U.S.-China Trade War will have a negative impact on Chinese companies.It is worth investigating whether American companies can fully benefit from the trade frictions between China and the United States without being hit.In this paper,Huawei's U.S.suppliers from different countries or regions producing different kinds of components are divided into two categories.The first category is U.S.suppliers with low dependence on Huawei.The annual operating income of these suppliers from Huawei accounts for a small proportion of the total operating income.The second category of suppliers are U.S.suppliers that rely heavily on Huawei.Huawei is often a big customer of such suppliers,and its annual total procurement accounts for a large proportion of the company's operating revenue.Once Huawei reduces or suspends orders,the operating revenue of such suppliers will be greatly reduced.Not only will the business performance be affected in many ways,but the U.S.-China Trade War will have a more significant negative impact on the market performance of U.S.suppliers with a high degree of dependence on Huawei,compared with suppliers a low degree of dependence.After that,this paper analyzes the adverse impact of the U.S.-China Trade War on the performance of Neo-Photonics,which accounts for nearly half of the annual operating revenue from Huawei.First of all,after the largest customer Huawei,is included in the Entity List,the company's revenue in the Chinese market will suffer a great loss.The proportion of Huawei will decline by nearly 15%,and the company's collection capacity to major customers will also deteriorate.Secondly,if the U.S.-China Trade War causes the suspension of orders for Huawei of Neo-Photonics,the company's performance forecast will be lowered,major shareholders of the company will reduce their holdings in a large scale,and the stock rating will also change frequently.Later,through the event study method,it was found that the U.S.-China trade negotiations and Entity List events would have positive and negative impacts on the market performance of Neo-Photonics.Finally,the U.S.-China Trade War makes the Chinese market full of unstable factors,which makes Neo-Photonics face higher default risk.The proportion of the company's use of revolving loans decreases significantly,which will also affect the company's investment behavior and capital use efficiency.In response to the U.S.-China Trade War,Neo-Photonics will also improve product research and development,strengthen cost control and change financing methods.The U.S.-China Trade War is an unexpected event that will have an external impact on many companies in the global value chain,not only in China but also in the United States.This paper studies the effect of macro trade policies on enterprises' micro performance.From the indirect perspective of suppliers,this paper explores the adverse effects of the U.S.-China Trade War on Neo-Photonics in terms of customer business composition,collection capacity,performance forecast,market reaction,debt financing cost and scale,and capital utilization efficiency.It can provide new ideas for studying the micro-level impact of trade friction and rich case studies on upstream suppliers and international trade disputes.