NASDAQ: Semiconductors Flutter on Trump Huawei Threat

NASDAQ – Semiconductor stocks traded negatively after the US government banned US companies from using equipment from Huawei. Various companies on the NASDAQ stepped back from a two-day rebound.

Among the notable selloffs were key suppliers like Qorvo Inc. and Skyworks Solutions Inc.

The Philadelphia Semiconductor Index, an index that consists of companies that design, distribute, and manufacture semiconductors, lost more than 1.7%.

Skyworks, Micron Technology and Qualcomm lost more than 3%. Qorvo fell more than 6% while Western Digital Corp dipped as low as 2.5%. All of these companies consider Huawei as a major customer.

Qorvo and Skyworks derive around 10% of their revenue from Huawei, according to analsyts.

NeoPhotonics and Lumentum Holdings also had massive losses. NeoPhotonics lost as much as 15% while Lumentum slipped 8.1%.

The global sales of semis reached $96.8 billion in the first quarter of 2019. This was a 15.5% slump from the fourth quarter and 13% year-on-year, according to reports from the Semiconductor Industry Association.

However, there were also ones that bucked the trend. Cisco Systems soared after delivering its first-quarter results and topped expectations. It also issued upbeat revenue guidance, bolstering its share price 7% higher.

Outlook for the Companies

The selloff in the index had come on the backdrop of worsening US-China trade war and after the White House’s Huawei ban.

According to the order, the technology that could be banned will include those that are “designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the direction of a foreign adversary.”

“It goes without saying that any such action would be terrible for any Huawei supplier, and for the semiconductor industry at large,” said a semiconductor analyst, commenting on the situation.

The analyst said that any restriction of component sales to Huawei would be much more significant than last year’s temporary ZTE ban.

“Given Huawei’s size, we don’t think business lost by sales restrictions to Huawei could be made up elsewhere,” he added.

For traders, focus will be on earnings from Nvidia and Applied Materials after the bell, with the goal of gauging the outlook for the sector.