Broadcom's $2 billion warning rattles global chip sector
LONDON/BENGALURU (Reuters) - 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.