Huawei Fracas Puts the Hurt on Semiconductor Stocks

Sino-American Trade War, meet Newton’s Third Law.

There was always going to be blowback from America’s commercial tussle with China – you can’t muck with a country’s largest private enterprise (Huawei) without repercussions. And far be it for me to sympathize with a company that paid employees to steal from other companies. I don’t. But that doesn’t make this hurt any less.

On Monday, in response to the Huawei fiasco, U.S. and European chipmaker stocks took a plunge. According to Reuters, STMicroelectronics fell 8%, while Infineon Technologies dropped 4.5%, and U.S chipmakers Qualcomm, Xilinx, Micron Technology, Broadcom Inc., Skyworks Solutions and Advanced Micro Devices fell from 3% to 5%.

And the cause? A sharp threat to the global supply chain, specifically to Huawei (aka, the world’s #2 smartphone maker).

Apparently, Infineon has ceased shipments to Huawei, with Google’s Alphabet, Inc. suspending some business and STMicroelectronics considering the same. And, as Barron’s points out, Huawei is among the world’s largest buyers of semiconductors. Every action indeed …

Politics often intercede with global trade – the trick is balancing the two.

“Let’s be clear – we are talking tens of billions of dollars impact,” said C.J. Muse, senior equity research analyst at Evercore. “Loss of this business would slow down investments by U.S. chipmakers, thereby reducing the competitiveness of the U.S. semiconductor industry – and that is a national security issue that the U.S. government needs to consider as well.”

Read more here: www.reuters.com/article/us-huawei-tech-usa-chipmakers/chips-are-down-huawei-u-s-blacklisting-knocks-semiconductor-stocks-idUSKCN1SQ0KY