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Lenovo, ZTE shares tumble as investors fret over impact of China hack report

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The potential impact on Lenovo could be substantial if the hacking concern keeps snowballing, says Daiwa Research. It estimates that Lenovo earns over a fifth of its revenue from the US.

Hong Kong

SHARES in Lenovo Group and ZTE Corp tumbled on Friday, hurt by worries about overseas sales after Bloomberg reported that systems of many US firms had been infiltrated by malicious computer chips inserted by Chinese spies.

Bloomberg Businessweek cited 17 unidentified sources from intelligence agencies and business that Chinese spies had placed computer chips inside equipment used by about 30 companies and multiple US government agencies, which would give Beijing secret access to internal networks.

Apple Inc and Amazon.com Inc, named as being among the US companies that had been subject to the attack, denied the report. Super Micro Computer Inc, which Bloomberg said was the supplier of server boards that contained the malicious chips, also denied the report.

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The report did not say any Chinese tech firms were involved in the attack. But Lenovo shares plunged 15 per cent on fears that consumers and businesses may become reluctant to buy Chinese tech goods.

"Super Micro is not a supplier to Lenovo in any capacity. Furthermore, as a global company we take extensive steps to protect the ongoing integrity of our supply chain," Lenovo said.

Daiwa Research said: "If the hacking concern keeps snowballing, the potential impact on Lenovo could be substantial." It estimates that Lenovo earns over a fifth of its revenue from the United States.

Chinese telecoms equipment maker ZTE, whose Hong Kong-listed shares fell 11 per cent, declined to comment.

The IT hardware sector sub-index on the Hong Kong stock exchange plunged 4.7 per cent, as investors fretted over the impact of the hack report at a time when the industry is already reeling from an intensifying China-US trade war.

"This could prove a death blow to China's ambitions to leap up the value chain by 2025 as Western markets are likely to slam shut on the likes of Huawei, ZTE, etc," Michael Every, a senior Rabobank strategist, said in a note to clients.

"Taken together with the imposition of 25 per cent tariffs by the US ... this will only accelerate a move of the electronics supply chain out of China and into Mexico."

Huawei Technologies declined to comment. REUTERS