Broadcom's $2B warning rattles global chip sector
reuters.com
reuters.com
Putting the math on this here for everyone else:
> Huawei accounted for about $900 million, or 4%, of the company’s overall sales last year. Broadcom, however, also said the forecast cut “extends beyond one particular customer.”
So total sales were 22.5B and a 2B hit is indeed pretty bad!
> The semiconductor industry has been grappling with slowing demand since the second half of 2018 with bellwether Texas Instruments warning in April that a cyclical downturn could last for another two years.
> That has related chiefly to signs that mobile phone markets in some major economies are increasingly saturated while mass demand in new areas like self-driving cars and internet of things devices for homes and offices is still developing.
So the $2B is not just the trade tensions (sure, these are not helping), but the overall saturation of the market for consumers.
While the latest greatest phones are awesome, I personally haven’t felt the need to upgrade. When comparing say 3GS vs 4, that was a big leap and upgrade seemed warranted. We’ll see if the 2019 announcement season will be more exciting.
The Smartphone market has reached near saturation with 80%+ of adult in developed countries already owning a smartphone. There will be a long tail to reach 90%+. Replacement circle has also stretched to beyond 3 years. My 6s as a work usage mobile is doing great, if you don't game on it the only thing I could complain about is the Camera. ( I wish Apple still has an iPhones that is under $400, instead they keep pushing up the prices to increase ASP. ) And my 6s, when in use still feels way faster than many Phones being sold today. [1]
5% of 1.2B Smartphone is 60M Unit, and if we see another decline again this year, we are looking at 100M+ unit missing from the peak. That is going to have a widespread effect on the industry, especially when Apple, Samsung, and Huawei, each with 200M+ unit year ( Roughly 50% of the market )can invest into their own Silicon ( Such as Modem, SoC, Power, etc ), there will be a even smaller market for the rest of the players.
We have already seen peak Smartphone, and Winter is coming.
>We’ll see if the 2019 announcement season will be more exciting. I can bet it will be a boring year. Other than possibly the biggest leap in Camera quality since iPhone 6s to iPhone 7.
[1] https://pbs.twimg.com/media/D9D4o6qUcAA1DJd?format=png&name=...
Not so recently only the high end cars had a screen, nowadays every model in the range of every car manufacturer has a screen. So that growth has came to a standstill. Only if people suddenly start buying more cars more frequently can that sector grow.
Given how slow the main marques are at releasing bona-fide EV cars I think it is a long time before self driving gets to be a thing. Even internet of things is not exactly something the world is desperate for. Maybe the party is over.
Protectionism is theoretically a bad idea, but GDP is not the only measure of economies. Being largely self sufficient for example has real strategic advantages. In that context low tariffs (sub 10%) are not always a bad idea.
The headline is "rattles global chip sector" and they very quickly get to "8.6% drop" in share price.
It's quite clear, without knowing total revenue, that the $2B means quite a lot to Broadcom.
I wouldn't be surprised if they actually had the total revenue number in there and it got cut in editing. This isn't the economist, it's reuters.
1. The United States does not depend on manufacturing as the backbone to its' economic stability.
2. Emerging markets may use 'Chinese Technology' during periods of major growth, but as those emerging markets mature they will likely require the stability provided by the mature incumbents of the field*
* as long as those incumbents keep pace with the overall technological development.
2. Chinese developed products and services tend to be focused on the needs and uses of China, and receive little (but not insignificant) use elsewhere. US multinationals want everyone to use their stuff, and develop products and services with that in mind.
To pin this on Trump is to overlook the larger picture. He seems to be putting America first, as promised. Also, I dont think it's his idea alone.
1. Preventing China growing further thus surpassing USA in economic might and by extension military might.
2. Regime change in China, the communist party's downfall from power and possible breakup of mainland China.
They even have revived the cold war institution "Committee on the Present Danger" whos public lectures and discussions can be found on youtube.
Secondly I think the anti-China sentiment in USA is so strong that mr. Trump can be reelected on it.
For China this is a sputnik moment where they realize that for them to continue growth beyond this critical point, they need to become completely self-sufficient.
Yes, "China will invest more into its local tech", but:
1) It was already doing that
2) that's still an overall step back from getting turn-key tech solutions from foreign companies plus employee training on the new tech done through tech transfers and mandatory "joint ventures."
If China has to do everything itself, it will take a long time before it's a threat. Like Huawei is basically dead in the water now without American tech. I'm sure it won't be easy to start it all from scratch on its own (+gov aids which they were already receiving).
This is a completely ridiculous complaint because none of those transfers were forced. All of them were approved by American, European, Japanese and so on CEOs, not because anyone forced them but because they desired to gain themselves a lot of money, maybe also because their companies gained a lot of money in the short term, even if the deal was bad in the long term for their companies or for their countries.
Why do you see anything wrong in the fact that the Chinese were smart enough to negotiate good deals with their Western partners ?
You should blame the American etc. CEOs, because they were stupid and greedy, not the Chinese.
I had a former colleague that more than 10 years ago was detached by his company for several months at Huawei, teaching them how to manufacture mobile phones.
Already at the time I believed that it was a stupid technology transfer, and obviously, after a few years that Western company had to exit the mobile phone market, because, unlike Huawei, it was no longer competitive.
But again, none of those technology transfers was forced in any way.
I have no doubt that the Chinese conpanies, like many companies from USA or other countries, have also stolen some IP, when there was any opportunity. Nevertheless, having experience in mobile phone design, I am certain that whatever they have stolen was much less than what they have just bought from willing partners.
Moreover, it is obvious that during the last years they have improved a lot above whatever they have bought or stolen and now it is they who should fear that the Americans might want to steal their IP.
Supposing that the claims about IP theft are true, then the Americans should have presented some proof and they should have applied sanctions many years ago, because if there was any IP theft there was much more of it 10 years ago then now.
As it is now the USA sanctions look like commercial fraud, i.e. you have US companies that first lure you to buy products from them, claiming that they are better than alternatives, so you invest a lot of money in developing products that include US components, then, from one day to the other those US companies refuse to sell you their components causing you huge damages, as you might need a year or more to redesign everything to avoid US components.
This is a lesson for any electronics designer from any other country except USA, that from now on in any new project they should avoid components made in USA like the plague.
So just because there was more theft 10 years ago, we should not do anything about it ? 10 Years ago, the commercial product based on those theft was not damaging anyone in the US, because the quality was so low, and only chinese really could buy it. Today is different, the quality has increased and they very much plan on selling them outside of china. Just because you have cheated for the last 20 years, does not means you should be allowed to do so for the next 20, china wants to go global (no one forced them), so they should play by the same rules than everyone else.