In the dying days of the Trump administration, Chinese tech giant Xiaomi has been blacklisted from buying goods and services from US vendors. In so doing, it joins the unhappy company of Huawei and ZTE who have also felt the US’ wrath in recent years.
Under the US National Defense Authorization Act, Xiaomi has been labelled a national security threat, but unlike Huawei and ZTE, the mechanism is a little different and may have further consequences.
Being locked out of the US market is perhaps the most obvious consequence; Xiaomi will now struggle to buy parts from US companies, and license software from them too (hello Google troubles). However, unlike Huawei and ZTE, Xiaomi is a publicly listed and traded company, and a consequence of the US action is that US investors will likely have to divest their holdings.
Xiaomi publicly listed in 2018, and as a result has investors from all around the world, including the US. Not only will Xiaomi now likely concede market share in the US, but it may lose a good chunk of its investors, too.
Following the US moves this week, Xiaomi published a response on Twitter, shown below:
— Xiaomi (@Xiaomi) January 15, 2021
Xiaomi says, for its part, that it has always operated in compliance with laws and regulations of the countries it works in, that it provides goods and services for civilian and commercial use, and that it is not owned, controlled or affiliated with the Chinese military.
It finishes with a statement that it is not “a Communist Chinese Military Company” as defined by the NDAA, and will take action (presumably through the courts) to protect its interests.
For US stockholders, the news isn’t immediately grim – they will have until November this year to sell their stock. Not that they’ll be worth all that much – the US move has already wiped around 10% off the company’s share price.
For those of us who just enjoy using consumer products, though, it just means there’s even less quality competition to choose from now. Huawei phones used to be great, now they’re in dire straits. ZTE’s phones always met a particular need, and they too are on the ropes. How long it will take for Xiaomi’s phones to similarly deteriorate remains to be seen.
One wonders if the impending change in the US administration will see some of these measures implemented against Chinese companies eased or removed.