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The patent infringement investigation filed against Apple Inc. supplier Luxshare Precision by the United States International Trade Commission (USITC) over the weekend sent shockwaves, causing a 9.5-percent fall in Luxshare's shares on January 25. This Chinese company has been an integral cog in Apple's supply chain. Since 2004, the company has grown into Apple's top supplier. It has made connector cables, straps, Airpods and wireless charging for this global top brand. Its contributions are also beyond accessories given that it has played a key role in moving the hardware giant's value upwards.
The PI investigation has prompted a critical question as the new U.S. administration takes shape in Washington. Because despite President Joe Biden's quick reversal of several controversial policies of the Trump era within days after his inauguration, the USITC's probe eerily resembles a continuation of the previous administration's trade provocations.
The suspicion is natural, as there hasn't been a comprehensive China policy announced by the current administration. There was a pre-Biden optimism among many that a constructive approach towards China benefiting both countries economically would materialize during his presidency. And the filing of the complaint by U.S. based Amphenol Corp is being viewed by many analysts as a continuation of previous investigations rather than being a part of a fresh series of crackdowns against Chinese companies.
Security guards stand outside an Apple Inc. store at the Easton Town Center Mall in Columbus, Ohio, U.S., January 7, 2021. /Getty
That said, the Biden administration's passiveness towards such moves indicates that Chinese ingress in American business remains a controversial topic, perhaps even perceived as dangerous and threatening by some within in the new government.
Despite the company claiming that this latest notification would not have a significant material impact on its operations, it's the potential suspension of operations due to litigation that could impact the U.S. import of the company's products, thereby leading to a potential disruption in Apple's sales. Even in the U.S., about 45 percent of smartphone users use iPhone. Interrupting the supply chain could exact a toll on the users as well as the company itself.
It is important to note that the current notices issued by the USITC are about alleged infringement, not actual violation. Luxshare has also mentioned how it learned about the complaint through the USITC's website and set up a body to investigate the matter internally.
It is thus critical for all involved parties, including the current administration, to understand that a lack of conclusive evidence regarding subjects such as infringement could jeopardize supply line trade and impact internationally known brands and exports. Matters can be made worse if Chinese companies working with American businesses are dealt with protectionism like many were during the Trump era. Such measures would only seed further divisions between China and the U.S., instead of providing an opportunity to bridge the gulf.
Scriptwriter: Hamzah Rifaat Hussain
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