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Huawei crackdown

Huawei's leading Japanese suppliers face $230m hit to profits

Loss of key client would hurt Murata, TDK and peers, research finds

The effective ban of U.S. technology sales to Huawei could hit Japanese suppliers hard.   © Reuters

TOKYO -- The loss of sales to Chinese telecommunications equipment maker Huawei Technologies would depress profits at four of Japan's biggest electronic parts suppliers by up to 25 billion yen ($230 million), research by Nikkei and Goldman Sachs finds.

The Trump administration's move last month to deny Huawei access to American technology have rattled its supply chain, which stretches from Asia to the U.S. to Europe and sustains its high market shares in smartphones and base towers.

Among its Japanese suppliers, four names -- Murata Manufacturing, TDK, Kyocera and Taiyo Yuden -- are among the most exposed to disruption based on their year-earlier earnings. Shares in these companies have fallen about 10% over the past month.

TDK supplies rechargeable batteries for Huawei smartphones, and batteries for premium models are thought to fetch high profit margins. The U.S. restrictions also threaten components for noise reduction and other applications.

In all, TDK's operating profit would fall by up to 9 billion yen if its sales to Huawei drop to zero, according to the analysis, which includes research by Goldman Sach Japan's Daiki Takayama.

Murata and Taiyo Yuden face the risk of falling sales of capacitors for Huawei-made base towers. Murata stands to take a roughly 10 billion yen hit to operating profit, while the smaller Taiyo Yuden would see earnings undercut by around 1.5 billion yen.

Chip package supplier Kyocera faces a roughly 4 billion drop in operating profit from a loss of Huawei sales.

Taiyo Yuden President Shoichi Tosaka played down the earnings risk, saying, "While the impact is not likely to be small, a significant portion will be offset by alternative demand."

All four companies supply Apple, but the iPhone maker's sales have slowed in a maturing smartphone market.

U.S. restrictions announced in May on trade with Huawei apply to U.S. companies and foreign vendors whose products contain a significant amount of American technology. Companies around the world have been trying to assess whether the de facto ban affects their business

Huawei said in April it aims to sell 250 million smartphones worldwide this year, but may have to downgrade this target if its supply headwinds continue.

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