Chipmakers' revenue hurt by US-China trade war

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Donald Trump this weekend allowed expanded sales of US technology supplies to Chinese telcos.
Donald Trump this weekend allowed expanded sales of US technology supplies to Chinese telcos.

The US-China trade war become the greatest headwind for revenue growth of the top 10 global chipmakers in the first quarter of 2019.

This is according to a TrendForce report, which has released the 1Q2019 rankings for the top 10 integrated circuit (IC) design companies worldwide by revenue.

While US president Donald Trump this weekend decided to allow expanded sales of US technology supplies to Chinese telecommunications giant, Huawei, the report shows in 1Q19, chipmakers and electronics manufacturers that depend on China for sales took a knock from the US-China trade war situation.

“Only MediaTek maintained a small growth among the top five companies, as Broadcom, Qualcomm, Nvidia and AMD all showed declines, as businesses reduced procurements for graphics processing units and also due to slowing smartphone demand globally,” according to TrendForce.

In May, Chinese tech giant Huawei and 70 of its affiliates were placed on a US blacklist that required American firms to obtain government permission to sell to the company, citing "national security threats" due to the company’s close ties to the Chinese government.

Huawei and other Chinese telecoms equipment makers rely on some key components from US firms.

The US has for months been rallying its allies to cut Huawei out of planned 5G networks. However, Huawei has repeatedly denied installing any backdoors in its networking equipment for alleged government spying.

This weekend Trump told journalists he has eased restrictions on Huawei as part of a trade truce with Beijing, removing an immediate threat looming over the global economy, even as a lasting peace remains elusive.

TrendForce senior analyst CY Yao points out that, although major IC manufacturers around the globe performed well in 2018, the US-China trade dispute and the slowing of the overall China market caused the global market to swing to a rather conservative mood in the first quarter of 2019, leading to less-than-satisfactory performances for many chipmakers.

“The outlook for the whole 2019 year presents a slowing global end market. If US-China relations don't smooth down after the G20 summit, they are feared to continue affecting revenue performances of IC design companies worldwide in 2H,” explains Yao.

“Nvidia declined the most in the top 10 companies due to unfinished destocking of its graphics cards for gaming; the revenue plunged by 40.9% year over year (YOY) in 1Q. The data centre market, which formed another main source of growth, showed the first decline in three years, as hyper-scale data centres and businesses gradually reduced procurements for graphics processing units.”

  • Broadcom was affected by the US Commerce Department's motion to place Huawei, a Broadcom customer, on the entity list during the US-China trade dispute, with its semiconductor department registering a YOY revenue fall in 1Q. However, CA Technologies will contribute to Broadcom's overall revenue after its acquisition by Broadcom.
  • Qualcomm's smartphone chip shipments declined by 17.1% YOY in 1Q, due to the fall in smartphone demand.
  • Although MediaTek was also affected by the global smartphone market, it managed to post positive growth in 1Q due to the adoption of its products by the likes of phone makers OPPO and Xiaomi since last year, and the strides made in the smart home market.
  • Novatek and Realtek all performed well in 1Q2019, despite limited growth momentum for smartphones worldwide. Touch and display and AMOLED panels have become the next big thing in this market.

“As penetration rates climbed, Novatek was able to ride the bandwagon and give a stellar performance, scoring above Realtek and snatching eighth place in revenue rankings,” notes TrendForce.

“Realtek benefited from the telecommunications and the display markets, as well as hot market demand for its true wireless stereo Bluetooth earbuds, and maintained revenue growth in 1Q.”

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