Shares of chip manufacturing firm Broadcom fell by 8 % as it missed revenue expectations and slashed revenue outlook from $2 billion. The tech firm’s gloomy report pulled down stocks of others in the chip industry along with Apple. Broadcom’s CEO Hock Tan blamed the downfall on recent ban by US government on firms within US forbidding them to sell components to Chinese giant Huawei. He stated that the trade conflict in addition to ban on Huawei exports is creating economic uncertainty. Last year Huawei accounted for $900 million worth of Broadcom’s direct sales but Tan insisted that lower guidance extends beyond one customer.
When Trump administration enforced restrictions on tech firms to desist from having any business relations with Huawei it also barred local firms from using telecom equipment from sources that are threat to national security like Huawei. The US Commerce Dept. has put Huawei’s name in a long list of firms that US govt. considers as entities that undermine interests of America though it did temporarily ease restrictions for some days. Beyond Huawei the firm says that several economic issues followed by slowdown in demand environment led to the shortfall in sales and profits.
Tan insisted that the business environment is in a very nervous stage and Broadcomm experienced rapid contraction in supply chain and orders. These gloomy comments dashed hopes in the chip market that was hoping for turnaround during second half. After this announcement other chip stocks like AMD, Nvidia, Qualcomm and Micron Technology all opened below 2 % while Apple which uses Broadcomm on its products fell by 1 % which shows how the ban and trade war has caused turbulence in the semiconductor industry. After the ban was announced Micron stopped all shipments to Huawei though legal teams at the firm are closely scrutinizing the order to see what can be shipped and what cannot as Huawei was its biggest customer in 2018.