Broadcom forecasts lower revenues after Huawei ban

(Image credit: Pixabay)
(Image credit: Pixabay)

Chipmaker Broadcom has reported a decline in Q2 revenues and has lowered its expectations for the year, blaming the ongoing difficulties at Huawei.

The beleaguered Chinese smartphone manufacturer is a major customer for Broadcom, which specialises in wireless communication chips for smartphones and other devices.

Last month, the US Commerce Department prohibited American firms from doing business with Huawei, a move which limits the company’s access to the Android operating system and key mobile components.

Broadcom Huawei

Although owned by Singapore’s Avago since 2016, Broadcom repatriated its headquarters back to the US in 2018. Unless there is a resolution to the situation, Huawei will be prohibited from procuring components from Broadcom for the foreseeable future.

The company will hope that the arrival of 5G smartphones and other new devices will stimulate the market, helping to offset any decline in revenue caused by Huawei. However, this will take time to have an impact.

"We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers,” said Hock Tan, Broadcom CEO. “As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year.”

Broadcom’s guidance for the year now stands at $22.5 billion - $2 billion less than previously stated. Shares in the company fell as a result, as did the stock prices of several other chip firms still waiting to see what the impact of the Huawei ruling will be.

Huawei has persistently denied any accusations of wrongdoing, while the US has never produced any evidence to support its claims the company’s networking equipment represents a threat to national security.