Chipmaker Broadcom’s price tag for US-China rivalry causes shockwaves
Loss of sales likely to cost the US chipmaker $2bn this year as trade tension and Huawei ban add to slowing demand
London/Begaluru — Broadcom sent a shockwave through the global chipmaking industry on Friday with its forecast that US-China trade tensions and the ban on doing business with Huawei Technologies would knock $2bn 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 10% in early trading in New York, wiping more than $11bn off the market value of the company, which was previously based in Asia but now with its headquarters and main listing in the US.
Shares in US chipmakers Qualcomm, Applied Materials, Intel, Advanced Micro Devices and Xilinx were all down between 2.5% and 4%. That followed similar falls for European peers including ASML, STMicroelectronics, Infineon and AMS.
“We’ll see a very sharp impact simply because [there are] no purchases allowed and there’s no obvious substitution in place,” CEO Hock Tan told a conference call with analysts in relation to the Huawei ban.
Broadcom, which got $900m in revenue from Huawei last year, also said, however, that the forecast cut “extends beyond one particular customer”.
“We’re talking about uncertainty in our marketplace, uncertainty because … of order reduction as the supply chain out there constricts,” Tan added.
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. Visibility is shot. OEMs [original equipment manufacturers] aren’t ordering. Inventory concerns, which were supposed to ease, have not gone away,” said one European trader. “Goodbye 2H [second-half] recovery hopes!”
Broadcom, known for communications chips that power Wi-Fi, Bluetooth and GPS connectivity in smartphones, is also a major supplier to Apple. Shares of the iPhone maker were down nearly 1% premarket on Friday.
The CEO of chipmaker Micron Technology also said the ban on Huawei brings uncertainty and disturbance to the semiconductor industry.
“It’s a broad-based decline they are now predicting,” said Neil Campling, tech analyst at London-based asset manager Mirabaud. “This is unlikely to be Broadcom specific but a trend to expect in H2 this year. A rebound for the chip sector, which many hope for, is highly unlikely.”