Being blacklisted by the US Department of Defense has not had a direct impact yet, but may still cause many difficulties for Xiaomi this year.
On January 14, the US Department of Defense 9 companies on the list of businesses with links to the Chinese military. Among these nine are Xiaomi, a major tech company in China.
According to the Reuters, being put on the black list means that “small grains of rice” are banned from trading and receiving investment capital from US partners. The ban requires investors to withdraw all capital from Xiaomi by November 11.
After Xiaomi is blacklisted, American investors will not be able to buy shares of this company. Photo: Reuters.
However, the impact of this action is not expected to come immediately as when Huawei was placed on the entity list of the US Department of Commerce. In May 2019, shortly after being added to the list, Huawei was turned away by many partners. Up to now, they are still not licensed by Google to use Google service pack on smartphones.
“Xiaomi is not on a ‘blacklist’ for component constraints, so the supply chain for smartphones and their devices will not be affected immediately,” said Neil Mawston, director of analyst firm Strategy. Shared Analytics.
Is Xiaomi the second Huawei?
The fact that Xiaomi was included in the list with links to the Chinese military surprised many analysts. Unlike Huawei, which is also on the “black list” of the US Department of Defense before, Xiaomi is considered a pure technology company and has little involvement with the government.
“The company can confirm that we do not own, control or have any involvement with the Chinese military,” Xiaomi responded shortly after being blacklisted by the US.
The fact that a company as pure technology as Xiaomi was added to the list was surprising. Photo: Reuters.
“Once you have the intention, there will always be a reason”, Ms. Linda Sui, director of smartphone research at Strategy Analytics shared with South China Morning Post. Ms. Sui said that Xiaomi is completely focused on technology products, not expanding into important areas like Huawei with 5G.
“I don’t think Xiaomi will be considered a company related to the Chinese military. They are not listed as an entity anyway,” said Kevin Chen, an analyst at China Merchant Securities. WSJ.
Xiaomi was founded by Lei Jun and many others in 2010. Lei Jun was then a billionaire, after taking Kingsoft company on the stock exchange. According to the BloombergQualcomm is one of Xiaomi’s earliest investors.
In the third quarter of 2020, Xiaomi overtook Apple in terms of smartphone sales globally, according to IDC data.
What will happen to Xiaomi?
Currently, being blacklisted means that US investors will be restricted from trading and have to withdraw capital from Xiaomi before November this year. According to the information of BloombergAmerican investors account for about 15% of Xiaomi’s shares, including companies like BlackRock, Vanguard Group and State Street Corp.
The bigger question, however, is whether the company will share the same fate as Huawei, being isolated from the US tech supply chain.
“The risk of Xiaomi being put on the entity list is quite high. If that happens, it will greatly affect finding components to make smartphones,” said Edison Lee, an analyst at Jefferies.
Although the North American market accounts for less than 0.1% of Xiaomi’s smartphone sales in the first nine months of 2020, according to IDC data, the company relies on chip supplies from Qualcomm, the chip developer. of America. Therefore, Xiaomi will face difficulties if there is a problem with the supply chain from the US.
Billionaire Lei Jun’s fortune has decreased by nearly $ 3 billion after negative information. Photo: Getty.
“Huawei is a special case when it is embargoed to buy chips from the US. If there is such a case, it would be very worrying. If Xiaomi is put on the entity list, it means no. Any Chinese company can be on the list, “said Nicole Peng, vice president of mobile at market analytics firm Canalys.
“Many companies will have to operate under the uncertain conditions of the US-China relationship,” added Nicole Peng.
Even without being included in the entity list, Xiaomi could have trouble.
“Xiaomi’s biggest challenge right now is that US agencies are looking more closely at them from a financial perspective and a number of other activities. That could lead to banks, suppliers and retailers globally. Consider working with Xiaomi from the second half of 2021 onwards. Xiaomi will have a difficult year ahead, ”explains Neil Mawston.
After the unfavorable information, Xiaomi’s share price fell 10% on January 15, causing Lei Jun’s assets to evaporate near 3 billion USD. The wealth of Mr. Lin Bin, the company’s vice president, also declined 1.5 billion USD. The assets of at least 5 other billionaire shareholders have also plunged.
Many analysts believe that this will only be a short-term difficulty for Xiaomi and many Chinese companies, especially when the US will have a handover in the next few days.
“Restricting Chinese companies is not a priority for the Biden administration. These bans will be reversed before November, so we will keep stocks, even buy more at good times,” said Vanessa Martinez. The analyst at Lerner Group told Bloomberg.
“In just five days, the US will have a new administration, and how it will continue or reject Trump’s decrees, and its treatment of China is still unclear,” said Matthew Kanterman, researcher. save now Bloomberg Intelligence identify.
According to the Zing
Embargoed by the US, will Xiaomi become the second Huawei?
Xiaomi was suddenly on the blacklist of the US Department of Defense even though it was just a pure consumer electronics company.