Broadcom Slashes Outlook as Trade War Drags Chipmaker Industry

Even before the opening bell, on Friday, shares of Broadcom dropped on the heels of semiconductor giant lowering its revenue outlook on the year.  Broadcom says it had to make adjustments to account for slowing demand as a result of the US-China trade war.

According to Broadcom president and chief executive Hock Tan, “We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of exports restrictions on one of our largest customers.”

Unfortunately, the San Jose-based firm is facing a complex situation.  For one, the company saw revenue grow by 10 percent over the same period last year, now at $5.51 billion, but this still fell short of analyst estimates of $5.67 billion.  In an earlier report, Broadcom had reported that its $5.20 per share earnings beat analyst estimates of $5.15 per share.

Furthermore, Broadcom has lowered its revenue outlook for 2019, from $24.5 billion to $22.5 billion.  They have said they expect maybe all but $5 billion of the projected outlook will come out of semiconductor solutions.  The rest, then, they hope to come out of developing infrastructure software. On top of this, the company has also announced a quarterly dividend of $2.65 per share.

Tan goes on to say, “As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year.”

Speaking of customers, Huawei is among Broadcom’s biggest. Unfortunately, the technology developer was blacklisted in May, in the United States, over potential national security concerns. This has obstructed the company from working with US business (like Broadcom).  

At the same time, shares of other international chipmakers also opened the market on Friday with a bit of a slide.  For example, Qualcomm—who had almost merged with Broadcom last year before US President Donald Trump shot the deal down (again, on concerns of national security)—was also down 2 percent before market open on Friday.  AMD, Nvidia, Analog Devices, and Maxim Integrated Products are all chipmakers down more than 2 percent. Micron Technology is down about 3 percent and Skyworks Solutions is down nearly 4 percent.