Just a few days ago there was one of the biggest earthquakes one would expect from the waning Trump administration’s offensive against Chinese companies. The Department of Defense then designated Xiaomi as a Chinese military company, something that will have consequences on Xiaomi , although for the moment not as aggressive as those that Huawei has suffered.
The first impact that Xiaomi has noticed after the White House announcement has been a loss of 10% of its market value , a major blow for the company, but which could be much worse if the veto is tightened.
A veto on investment, not commercial
The differences are great, at least today, because let’s remember that there is considerable uncertainty about how these vetoes could evolve over time, taking into account that in just a few days Joe Biden will take office as President of the United States. There are important differences in both vetoes, and for the moment it is something that benefits Xiaomi , which will not affect its main business at a commercial level. The new veto of the United States, now imposed on Xiaomi through an executive order. It forces Xiaomi’s North American investors to withdraw their investment from the Chinese company before November 11, 2021.
Therefore, North American companies are prevented from investing money in Xiaomi, hence the loss of value of the Asian company in just a few days. Therefore, the veto imposed by the United States on Xiaomi is limited to the investment of American capital in the company, which for now should be a relief for the Chinese company, given the aggressive veto of Huawei.
Does it look anything like the Huawei veto?
There are many factors that make us think that we are not facing a veto comparable to that of Huawei, not only now, but in the medium term. Huawei has been cut off access to Google products , as well as Qualcomm chips and the manufacture of the Kirin by TSMC . Something that is not going to happen to Xiaomi at the moment , since there is no commercial veto against the firm, something that Huawei is suffering.
Logically, the Xiaomi veto is a warning to sailors, but this could be diluted with the arrival of Joe Biden to the White House. Therefore, there are substantial differences between the veto imposed on Xiaomi, which is more of a business and stock market cut, and that of Huawei, which affects numerous lines of its commercial business.
Will the veto affect Xiaomi mobiles like Huawei’s?
This is something that we have already talked about at the time, and it is that from the first moment it has been clear that Xiaomi’s mobile phone business is not going to be affected, at least with the restrictions that have been imposed now. Logically, in the medium term, the divestment of North American assets could have an effect on the value of the company, which could affect its financial future , but today it seems unlikely. Therefore, at the moment there will be no changes in Xiaomi mobiles , nor in the rest of the products in its commercial portfolio.
Therefore, the differences are clear in this regard:
- Xiaomi can continue to use Google services and apps, Huawei cannot
- Xiaomi can continue to buy Qualcomm processors, Huawei cannot
- Xiaomi has no limitations with North American technology providers, Huawei has them vetoed
Logically, this will remain on paper if tomorrow the restrictions are extended to Xiaomi and a commercial veto like that of Huawei is imposed on it. Something that while Trump is still in the White House should not be ruled out, although he only has three days to do so.
