Broadcom’s $2B sales loss warning shocks industry
LONDON/BENGALURU — 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 $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 10 per cent in early trading in New York, wiping more than $11 billion off the market value of the company, previously based in Asia but now with its headquarters and main listing in the United States.
US chipmakers Qualcomm, Applied Materials, Intel, Advanced Micro Devices and Xilinx were all down between 2.5 per cent and 4 per cent.
That followed similar falls for European peers including ASML, ST Micro electronics, 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,” chief executive officer Hock Tan told a conference call with analysts in relation to the Huawei ban.
Broadcom, which got $900 million 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 the — of demand in the form of order reduction as the supply chain out there constricts — compress, so to speak,” 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 selfdriving 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 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 nearly 1 per cent premarket.
The CEO of chipmaker Micron Technology also said the ban on Huawei brings uncertainty and disturbance to the semiconductor industry. —