Broadcom Inc sent a shockwave through the
global chipmaking industry on Friday with its forecast that U.S.-China
trade tensions and the ban on doing business with Huawei Technologies
would knock $2 billion off the company’s sales this year.
The forecast, included in the company’s second-quarter results late on
Thursday, was the hardest evidence yet of the damage President Donald
Trump’s trade war with Beijing may do to the global industry.
Shares in Broadcom fell as much as 8.6%, wiping more than $9 billion off
the market value of the company, previously based in Asia but now with
its headquarters and main listing in the United States.
U.S. chipmakers Qualcomm, Applied Materials Inc, Intel Corp, Advanced
Micro Devices Inc and Xilinx Inc were all down between 1.5% and 3%.
The Philadelphia chip index was down nearly 3% with 29 of its 30
components trading lower. Shares of other Huawei suppliers like Analog
Devices Inc, Skyworks Solutions and Qorvo Inc also fell.
European peers including STMicroelectronics, Infineon and AMS ended the day lower.
“We’ll see a very sharp impact simply because (there are) no purchases
allowed and there’s no obvious substitution in place,” Chief Executive
Officer Hock Tan said on a post-earnings call with analysts on the
Huawei ban.
Huawei accounted for about $900 million, or 4%, of the company’s overall
sales last year. Broadcom, however, also said the forecast cut “extends
beyond one particular customer.”
“We’re talking about uncertainty in our marketplace, uncertainty because
of the – of demand in the form of order reduction as the supply chain
out there constricts – compress, so to speak,” Tan said.
The semiconductor industry has been grappling with slowing demand since
the second half of 2018 with bellwether Texas Instruments warning in
April that a cyclical downturn could last for another two years.
That has related chiefly to signs that mobile phone markets in some
major economies are increasingly saturated while mass demand in new
areas like self-driving cars and internet of things devices for homes
and offices is still developing.
The geopolitical risks from the trade conflict and Huawei ban are an additional shock.
“It’s not just Huawei, it’s deeper than that. OEMs [carmakers] aren’t
ordering. Inventory concerns, which were supposed to ease, have not gone
away,” said one European trader. “Goodbye H2 recovery hopes!”
Broadcom, known for communications chips that power Wi-Fi, Bluetooth and
GPS connectivity in smartphones, is also a major supplier to Apple Inc
and shares of the iPhone maker were down 1%.
“We believe Broadcom’s 2H19 outlook is not only impacted by the direct
Huawei export ban, but also includes the indirect impact from the Huawei
export ban to other customers as well as the possible industry-wide
impact of the possible additional import tariffs,” Summit Insights Group
analyst Kinngai Chan said.
Finisar Corp, which makes sensors for facial recognition, transceivers
and other components for telecommunication networks, said in a
regulatory filing that ban on Huawei could have continuing negative
impact on its future revenue. Huawei represented 10% of its total
revenue in fiscal 2019.
The CEO of chipmaker Micron Technology also said the ban on Huawei
brings uncertainty and disturbance to the semiconductor industry.
Micron will report its third-quarter results on June 25.
“I think you have seen all the companies (Qorvo, Skyworks, Maxlinear,
Cree, Inphi, Lumentum, NeoPhotonics) which pre-announced negative for
about half their quarter’s impact due to this Huawei export ban,” Chan
said.
“The issue now is that there will be a second degree (indirect) impact
as well that most companies do not want to talk about. We believe the
next wave of companies that should be echoing what Broadcom says are
Micron and Western Digital,” Chan added.
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