Huawei ban triggers 40% slide in shares of chipmaker IQE

Profit warning from British tech company blames impact of US sanctions

Shares in chipmaker IQE plunged as much as 40 per cent after it warned 2019 revenue would miss forecasts on the back of the Huawei sanctions.

Shares in chipmaker IQE plunged as much as 40 per cent after it warned 2019 revenue would miss forecasts on the back of the Huawei sanctions.

 

Shares in chipmaker IQE plunged as much as 40 per cent on Friday after the tech supplier warned its 2019 revenue would miss forecasts, blaming a bigger-than-expected hit on the industry’s supply chain from US restrictions on China’s Huawei.

The United States restricted Huawei Technologies from buying US goods in May, saying the firm’s equipment could be used by Beijing for spying. The move ratcheted up trade tensions between the world’s two largest economies.

IQE, which makes semiconductor wafers for chips used in Apple products among others, is also suffering from a global slowdown in demand.

It said it had recently received a reduction in forecasts from several chip customers in its wireless and photonics units, hitting anticipated revenues for those businesses.

Chief executive Drew Nelson said IQE was operating in “unprecedented times” for the semiconductor industry.

The company now expects revenue of £140 million to £160 million (€157 million to €179 million) this year, compared with analysts’ consensus estimate of £175 million. IQE said this reflected a larger impact than previously forecast for risks related specifically to Huawei.

“It is now clear that the impact of Huawei’s addition to the US bureau of industry and security’s entity list is having far-reaching and long-lasting impacts on global supply chains,” Mr Nelson said.

US chipmaker Broadcom sent shockwaves through the chipmaking industry last week with its forecast that US-China trade tensions and the ban on business with Huawei would knock $2 billion off the company’s sales this year.

IQE rival Siltronic, a German maker of wafers used to make silicon chips, issued its second profit warning in two months on Tuesday, another victim of the US crackdown on exports to China.

“After our Apple analyst’s recent forecast cuts and recent commentary from Broadcom, it is also possible that IQE might be seeing a more muted iPhone supply chain ramp in 2H,” Canaccord Genuity analysts said.

Smartphone shipments

Huawei is preparing for a 40 to 60 per cent decline in international smartphone shipments, Bloomberg reported on Sunday citing people familiar with the matter.

IQE had said in May that less than 5 per cent of its 2019 revenue was exposed to Huawei risks. The company also said then that it supplies epitaxial wafers to multiple chip companies, some of which supply Huawei.

IQE’s shares had already lost 14 per cent since March, when it missed its own 2018 core earnings forecast, hurt by weak demand for smartphones that in turn dented orders for semiconductor components.

At 10:30am, IQE shares were down 31 per cent, having earlier hit a 15-month low.

IQE’s warning also hit stocks of European chipmakers including Siltronic, Infineon, AMS , Dialog, STMicro. – Reuters