Trump’s Huawei ban offers opportunities for Malaysia?

PETALING JAYA: The ongoing trade spat between Washington and Beijing, especially in the wake of President Donald Trump’s ban on Chinese technology giant Huawei, could be good news for Malaysian mobile phone components manufacturers, says an economist.

Barjoyai Bardai said Malaysia, which is already manufacturing smartphone parts for export, can now replace China’s role in the supply of chips and components.

He said China could also contract Malaysian firms which already have the expertise and technology in manufacturing these components.

“We stand to benefit from this crisis because we will actually be creating a particular niche in supplying the parts,” said the Universiti Kebangsaan Malaysia professor.

At of October 2017, smartphone components made up more than 16% of Malaysia’s total exports.

The Economist recently reported that US firms stand to lose US$10 billion a year in licensing revenue for chips and components.

It said much of China’s hardware-manufacturing industry depends on US components that cannot easily be sourced from elsewhere or produced at home.

Trump recently signed an executive order to ban Huawei’s equipment from US networks, sparking fears that other Chinese firms could face similar action.

Barjoyai said there could be a hurdle if the Malaysian supplier is also the American manufacturer for the parts.

“They may get indirect instructions from the US to not supply or not cooperate with the Chinese.

“If that happens, we may lose an opportunity,” he said.

But not all would be lost, he added, as new joint venture companies could be formed with China.

“Malaysia can make the first move to initiate such a cooperation, and it could be done at a government-to-government level,” he said.

Another way of getting around the US ban, Barjoyai said, would be to assemble the phones in Malaysia.

But this depends on whether there is a pressing need for China to enter into such a cooperation.

“The crucial issue here is whether China will be desperate enough to initiate cooperation with Malaysia,” he said.

Economist Hoo Ke Ping agreed that the heightened tension between the US and China could bring in more business to other regional players.

He said multinational companies Trump has targeted are considering setting up new bases in Vietnam, Bangladesh, Singapore and Malaysia.

“So the question is, how will this war benefit or hurt Malaysia? In the short term, a lot of Malaysian factories will receive more orders. Rather than selling the parts to the Chinese companies, they can sell them straight back to the US.”

But Hoo warned that in the long term, a full-blown US-China tech war would be disastrous for others, including Malaysia.

He said the trade war could cause a reduction in gross domestic product growth globally.

“This means trading nations like Malaysia will be impacted badly, whether financially or in trade. Commodities will all be suppressed, whether timber, palm oil, petroleum or electronics.

“The overall impact is negative for Malaysia. If the trade war lasts, we may tend to get into recession sooner,” he added.