Sat, Jun 15, 2019 - Page 10 News List

Broadcom retreats from sales forecast

TRADE DISPUTE:CEO Hock Tan said that the US-China trade conflict, including a Huawei Technologies export ban, is creating uncertainty and reducing visibility

Bloomberg

Broadcom Inc on Thursday cut its annual sales forecast, indicating that the trade dispute between the US and China will wipe out a rebound in orders it had been predicting for the second half of the year.

Revenue would be US$22.5 billion in this fiscal year, the San Jose, California-based company said in a statement. That compares with the prediction it gave three months ago of US$24.5 billion and indicates that it expects to lose out on US$1 billion of revenue per quarter for the rest of the year.

Broadcom chief executive officer Hock Tan (陳福陽) has built one of the world’s biggest chipmakers through a series of acquisitions that give the company one of the broadest reaches in the industry. About half of the company’s revenue last year went through China and Huawei Technologies Co (華為) is one of its biggest customers.

With the world’s two largest economies caught up in an escalating dispute of tariffs and blacklisting, Broadcom is one of a number of chip firms caught in the crosshairs.

“It is clear that the US-China trade conflict, including the Huawei export ban, is creating economic and political uncertainty and reducing visibility,” Tan said on a conference call. “Our customers are actively reducing inventory levels.”

Last year, Huawei accounted for about US$900 million of Broadcom’s sales, Tan said.

Other companies are cutting chip orders on concern that the trade standoff will take a deeper bite out of the economy and that is causing a “very, very, sharp and rapid contraction,” he said.

This is happening even though end demand for devices remains fine in Europe and the US, he said.

The reduced outlook is “very conservative” and attempts to capture the impact of threatened higher tariffs, Tan said.

His company’s outlook is not confined to its status as a supplier of China’s biggest hardware company. The chipmaker’s position as a manufacturer of components for Apple Inc and Samsung Electronics Co makes its orders a gauge of confidence in future demand from some of the world’s largest makers of smartphones.

It is also one of the leading suppliers of networking components used by large data-center operators such as Alphabet Inc’s Google and Amazon.com Inc’s cloud division.

Concern about exposure to China has weighed on Broadcom’s stock this year. It is up 11 percent this year compared with a 21 percent advance by the Philadelphia Stock Exchange Semiconductor Index. The sector was hammered last year by slower orders from customers who built up unused stockpiles of parts.

The chipmaker has stopped giving quarterly forecasts and instead updates its longer-term prediction each quarter.

Sales rose 10 percent to US$5.52 billion in the quarter ended May 5. That fell short of analysts’ predictions. Excluding certain items, profit was US$5.21 per share.

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