Broadcom's $2B warning rattles global chip sector(reuters.com)
reuters.com
Broadcom's $2B warning rattles global chip sector
https://www.reuters.com/article/us-huawei-tech-usa-chipmakers-broadcom/broadcoms-2-billion-warning-rattles-global-chip-sector-idUSKCN1TF0O1
27 comments
Not to mention this quote in the middle of the article:
> 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 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.
We already saw what s 5% Smartphone sales decline / missing target look like in 2018, with rapid price collapse in NAND and DRAM. Trade War wasn't really the main issue.
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=...
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=...
Has is in-car-entertainment stagnated too?
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.
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.
Funny you mention that because co-habiting the front page of HN right now along with this thread is news that Madza is removing touch screens from its in-car systems. Tactile buttons are best when operating a machine that requires focus. Being able to reach for and feel a button, lever, or dial while focusing on driving is way safer than having to stare a a small screen to press the right area.
If emerging markets are where growth & recovery is at, the US certainly won't compete there through protectionism. This isolationist approach to trade is just that... You can't have many 20B+ dollar companies if they're the only market is the US and it's saturated and we simply don't have the manufacturing capability at their expected cost and margin
Having multi billion dollar companies is only so useful when significant portions of production, sales, and stock ownership is outside the US.
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.
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.
I think you're being far, far too critical. It's a "short form" article, "4 min read" which really means under 1 minute.
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.
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.
Sure, but how big a percentage of Broadcom this is isn't the whole story. It's not just about the impact on Broadcom, but also the impact on the economy and communities. A loss of $2bn worth of orders would probably have a similar impact in terms of jobs for example regardless of how big Broadcom was, perhaps unless they went bust.
It shouldn't affected Micron as much considering it already has one of the lower P/E ratios and P/B ratios in the industry. It seems like their declining earnings and exposure to China should already be priced in.
With that said it will probably affect Micron just the same if not more considering Huawei made up, I believe, 13% of their sales last year.
The idea that this is all happening in what was already a down cycle for the industry will cause people to become fearful and impatient.
What I don't understand is, if you are afraid of the Chinese government somehow interfering with the building process, shouldn't they start building everything in US?
The trade war with China is reckless and damaging to the US chip industry. This is a self-inflicted wound that should of been avoided.
Chinese protectionism and theft of IP can't be avoided. Self-inflicted wound? Yes, but it's meant to make the chronic soreness go away.
You do realize that China is now just going to develop its own CPUs, it's own OS's and its own devices now and China will be better suited to sell to emerging markets where the real growth is since US companies can't compete. I also know the 3rd licensee of X86 will be benefiting from these trade wars because their demand will be going up and they're not a US company.
Even if this entire comment thread were not a vast oversimplification of these markets, why would this be such a bad thing? Two main points to this:
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.
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.
1. China has been developing its own tech for years. Said theft helped make it happen.
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.
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.
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>> The forecast, included in the company’s second-quarter results late on Thursday, was the hardest evidence yet of the damage President Donald Trump’s trade war with Beijing may do to the global industry.
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.
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.
Mr. Trump surrounds himself with people who has the explicitly stated goals of:
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.
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.
Of course the media present doom and gloom. But many of these companies have diversified their business. Most companies mentioned in this article have diversified their customer base and while there is some short term pain, most will move past this. Longer term, I think we are creating a competitor in China. I can’t imagine the Chinese government, seeing how vulnerable they are, won’t invest heavily to produce internal competitors.
So you are saying that after the short term pain there will be... long term pain (a strong competitor created)?
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The US government is not interested in the long term. The horizon is the 2020 election.
Have you paid attention at all to China in the past decade? China was already a competitor in many industries, getting rapidly better -- and it did all on the backs of American tech either by stealing it or through forced tech transfers.
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).
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).
I see a lot of claims about "forced tech transfers" to Chinese companies.
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.
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.
> 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.
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.
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.
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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!