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Broadcom hopes for a recovery of the chips in the second half of the year



Broadcom Inc. has largely negated the remaining hopes for a significant recovery in the semiconductor market this year, and on Thursday it cited a combination of sanctions against Huawei Technologies Co. and customers unsettled by trade concerns.

Broadcom

AVGO, + 0.67%

lowered its forecast for the remainder of the year, while announcing second-quarter earnings on Thursday afternoon. Based in San Jose, California, the company expects revenues for its semiconductor solutions business, which continues to be the largest contributor to revenue, to decline approximately 1

0% for the full year due to export bans on key accounts such as Huawei and ongoing trade tensions.

"In the second half we had expected a recovery; However, as far as semiconductors are concerned, it is clear that the US-Chinese trade conflict, including the Huawei export ban, creates economic and political uncertainties and reduces visibility for our global [original equipment manufacturer] customers, "said Broadcom CEO Hock Tan analysts during a conference call ,

Broadcom was not the only company that had forecast a stronger second half of the year. Almost every chipmaker has ever predicted that sales growth would return in the second half of the year, even though the target had already fallen behind with the previous second-quarter earnings.

From March: The promise of a magical upswing for the technology is underpinned by little evidence.

The results of Broadcom – which last until early May – show that concerns have been elicited by others chip companies months ago have not subsided, and in fact may have sped up. Broadcom shares fell by around 8% in after-hours trading, and most semiconductor stocks also suffered a blow in the after-hours market. The S & P 500 Index has the biggest decline after-hours

SPX, + 0.41%

were all chip makers alongside Broadcom on Thursday, led by 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%

all declined 2% or more as the extended session neared completion.

Tan described skittish OEM customers who were afraid to place new orders They do not consume their supplies against the background of political uncertainty, and an end to the trade war between the US and China is not in sight. Analysts had predicted that US sanctions on Chinese network giants Huawei would affect Broadcom's revenue, but the warning went well beyond that decline. Tan told analysts that Huawei generated sales of around $ 900 million last year, but expects a deficit of more than $ 2 billion for the second half of the year.

It's broad-based, "Tan said when asked how large Huawei's shortfall was compared to other OEMs. Broadcom's Semi-Solutions business – about three quarters of Broadcom's total revenue – decreased 10% in the quarter.

"We are seeing a very, very sharp and rapid contraction in the supply chain and orders of our customers, especially global OEM customers," Tan admitted.

The US ban on Huawei should lead to a certain cooling for the chip manufacturers. Stacy Ragson, an analyst with Bernstein Research, said in a recent statement that "in the second half of the year and beyond, a Huawei-related drawback for many semiconductor companies is likely to be a topic. (In fact, this could be a kind of free pass for businesses to lower expectations.) "

But Tan admits that the second half of the year looks far beyond Huawei's – will not be the panacea, the company early this year Year ago. The surprised ones did not pay enough attention.


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