In the past five trading days, telecom stocks witnessed a steady descent due to the lingering trade uncertainty, triggered by Middle East tensions, clouding the prospects of the industry that bore the brunt of the Sino-U.S. trade war. Although both the United States and China have agreed to ease the bilateral tensions and pave the way for an earlier settlement of trade disputes, tense undercurrents prevailed across the board. The Federal Communications Commission (“FCC”) and two U.S. senators continued to pile pressure on the authorities to curb Chinese infiltration in the domestic telecommunications network. As the trade negotiators sit across the table this week to set the ball rolling for higher level of talks in October, the industry awaits a mutually agreeable solution to rejuvenate the beleaguered sector.
The FCC has initiated a new program dubbed ‘Find it, Fix it, Fund it’ to provide rural telecom carriers adequate funds to self-assess networks and identify ‘suspect equipment’ that could siphon off data. Initially, the government agency intends to allow the equipment to stay within the network after being quarantined, but plans to rip and replace it in the long term. The FCC is reportedly planning to bring regulatory changes to make the initiative a compliance issue for rural telecom firms.
A couple of U.S. senators have also upped the ante against Chinese telecom players, urging the FCC to reconsider the decision to allow China Telecom and China Unicom to operate in the United States. The communist nation-backed telecom firms are believed to possess technical capabilities to conduct espionage against the U.S. government and are consequently deemed to be risks to national security. The senators have appealed the FCC to follow its own footsteps as it banned another state-owned firm China Mobile in May and revoke the telecom licenses of China Telecom and China Unicom to operate in the United States.
Meanwhile, trade negotiators from both the countries are meeting in person this week for the first time in nearly two months, hoping to bridge the deep policy differences and find a way out of protracted trade war. The bilateral talks are likely to focus on agriculture, including demand for higher volume of soybeans and other farm commodities purchase by China, and intellectual property protections and culmination of forced transfer of U.S. technology to Chinese firms.
Regarding company-specific news, R&D funding, factory modernization, acquisitions, service initiation and technology upgrades primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Corning Incorporated’s GLW R&D activities recently secured a significant boost for developing scratch-resistant glass for consumer devices with $250 million funding from Apple Inc.
The investment is part of the $5 billion Advanced Manufacturing Fund earmarked by Apple for encouraging the development of advanced manufacturing components in the United States in support of President Trump’s America First policy. The current funding underscores the solid business relationship between the two companies spanning over a decade and their shared commitment for developing pioneering innovations to help the United States maintain a cutting edge over other countries. (Read more: Corning Secures $250M Apple Funding for Glass Manufacturing)
2. Ericsson ERIC has successfully completed the transformation (valued at SEK 500 million) of its existing factory in Nanjing, China. This marks a significant milestone in the company’s smart manufacturing capabilities as the facility is considered to be one of the most advanced in the industry.
The upgrade, which continued for 18 months, has seen Ericsson modernize the production process in preparation for the introduction and rapid deployments of 5G in China. This includes the first modular-designed automatic assembly line for 5G radios, which will enable the company to produce the latest 5G radios for the Chinese market. (Read more: Ericsson Enables Smart Automation in China Factory)
3. Qualcomm Incorporated QCOM has completed the acquisition of the remaining interest in RF360 Holdings Singapore Pte. Ltd. — a joint venture with TDK Corporation.
Markedly, the joint venture has produced RF front-end (RFFE) filters, which allow the chipmaker to deliver 4G/5G RFFE solutions. The total purchase price is about $3.1 billion, which includes initial investment, payments to TDK based on sales by the joint venture and development obligations. (Read more: Qualcomm Buys Remaining Ownership Stake in RF360 Holdings)
4. NETGEAR Inc. NTGR recently announced the launch of value-added services for audio-visual solutions for seamless deployment across IP networking facilities.
In particular, NETGEAR has employed a dedicated team of experts to offer services ranging from pre-sales and post-sales support to technical training, white papers and best practices. This engineering services team is expected to empower audio-visual installers, consultants, manufacturers and resellers to gain technical know-how for deployment in IP networking assets. This, in turn, is likely to bridge the digital divide for the successful transition from legacy matrix switching to audio-visual solutions over Ethernet. (Read more: NETGEAR to Offer AV Support Services in IP Networking)
5. CommScope Holding Company, Inc. COMM has introduced two next-gen additions to its Reference Design Kit (RDK) Video Accelerator portfolio – a smart media device platform 7852 featuring Wi-Fi 6 connectivity and an IP client VIP7802 with Wi-Fi 6.
The new platforms have been jointly developed by CommScope and RDK Management — an open source consortium that manages RDK for the global community. These support RDK for video development, enabling operators to accelerate time-to-market with 4K video experiences, customized user experiences and web-based applications. (Read more: CommScope Unveils Wi-Fi 6 SMD & IP Client Platforms)
The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.
In the past five trading days, Motorola was the biggest gainer with its share price increasing 1.9% while AT&T was the biggest decliner with its stock down 5.4%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 27.6%, while Arista Networks was the biggest decliner with its stock down 21%.
Over the past six months, the Zacks Telecommunications Services industry has recorded average loss of 0.4% while the S&P 500 has rallied 4.9%.
What’s Next in the Telecom Space?
In addition to strategic deals, product launches and 5G deployments all eyes will remain glued to how the government handles the various issues related to trade war negotiations.
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