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The tech conglomerate Broadcom Inc. has virtually wiped out hopes of a substantial rebound in the semiconductor market this year, citing Thursday a combination of sanctions imposed on Huawei Technologies Co. and customers made nervous by commercial concerns.
Broadcom
AVGO, + 0.67%
lowered its forecast for the rest of the year and released its results for the second quarter Thursday afternoon. The company based in San Jose, Calif., Said it expects the business figure of its semiconductor solutions firm, which remains its largest revenue producer, to fall sharply. about 10% for the fiscal year due to export bans imposed on Huawei's large customer and ongoing trade tensions.
"In the second half, we expected a recovery; however … with regard to semiconductors, it is clear that the trade dispute between the United States and China, including Huawei's export ban, creates economic and political uncertainty and reduces the visibility of our global market. [original equipment manufacturer] Hock Tan, chief executive of Broadcom, told analysts during a conference call.
Broadcom was not the only company to expect a stronger second half. Almost all chip makers have predicted at one point or another that revenue growth will come in the second half of the year, although the target has already started to decline compared to the second quarter results.
Starting in March: the promise of a magic rebound for technology comes with little evidence to support.
Broadcom's results – which began in early May – show that concerns raised by other chip companies have not diminished and may have accelerated. Broadcom shares fell about 8% in after-hours trading and most semiconductor stocks were also affected by the overtime market. The biggest declines in the S & P 500 after hours
SPX, + 0.41%
Thursday, besides Broadcom, all the chip makers were under the direction of Qorvo Inc.
QRVO, + 0.84%
, Skyworks Solutions Inc.
SWKS, + 0.95%
, Advanced Micro Devices Inc.
AMD -2.45%
, Xilinx Inc.
XLNX, + 0.38%
, Texas Instruments Inc.
TXN, + 0.76%
, Microchip Technology Inc.
MCHP + 0.35%
and Micron Technology Inc.
MU, + 1.27%
who were all down 2% or more as the close of the extended session closed.
Tan described customers of feared equipment manufacturers who are afraid to place new orders in case they do not deplete their stockpiles, in a context of endless political uncertainty for the US-led trade war. China. Analysts had predicted that US sanctions imposed on Chinese giant Huawei networks would affect Broadcom revenues, but the warning went well beyond this fall. Tan told analysts that Huawei had generated a business turnover of about $ 900 million last year, but that he anticipated a deficit of more than $ 2 billion for semiconductors for the second half.
"Basically, it is the compression of the supply chain that drives this reduction, and it is widespread," said Tan, questioned about the importance of its shortfall compared to Huawei compared to other manufacturers . Broadcom's semi-solutions business – about three-quarters of Broadcom's total sales – declined 10% in the quarter.
"We are witnessing a very strong and rapid contraction in the supply chain and orders of our customers, particularly global OEM customers," admitted Tan.
The ban imposed by the United States on Huawei is expected to cause a slight slowdown in chip companies. Stacy Ragson, an analyst at Bernstein Research, wrote in a recent note that "a disadvantage related to Huawei would likely become a theme for many semiconductor companies in the second half of the year and beyond. (In fact, it can be a kind of free pass for companies to reduce expectations). "
But Tan's admission that the second half will be far beyond Huawei will be heard throughout the second half, which – as MarketWatch warned a few months ago – will not be the panacea suggested earlier. this year by the chip companies. Those who are surprised are not paying enough attention.
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