President Donald Trump signed an executive order Wednesday that limits how "foreign adversaries" conduct business with U.S. companies.
The Department of Commerce said China's Huawei and 70 related companies will be included in the "Entity List," prohibiting the company from buying U.S. components and technology without government approval, according to Reuters.
Rosenblatt Securities' Jun Zhang said in a Thursday note that the likelihood that Huawei will be sanctioned by the U.S. has increased from 10 percent to 50 percent.
The G20 Summit in June will be a "critical time to watch and see" if Trump can reach a resolution with Chinese President Xi Jinping, the analyst said.
Why It's Important
U.S. sanctions "may not kill Huawei," as it likely has two years of inventory and it may be able to source alternative supplies from Japan, Zhang said.
If the sanctions are slapped on Huawei, it will prove to be a negative headwind for U.S. semiconductor suppliers and communications equipment component suppliers, he said.
If Huawei is ultimately blacklisted from the U.S., it could cause Chinese consumers to boycott U.S. products, especially those made by Apple Inc. (NASDAQ: AAPL), Zhang said.
This could result in the iPhone losing more share in the Chinese market as consumers opt for local Huawei devices instead, the analyst said.
Apple shares were down 0.74 percent at $189.51 at the time of publication Thursday.
The Vaneck Vectors/Semiconductor ETF (NYSE: SMH) was down 1.59 percent at $107.29.
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Public domain photo via Wikimedia.
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