Now, semiconductor companies can join the unhappy club. The Trump administration put the Chinese telecom giant Huawei Technologies on a blacklist, citing concerns about providing financial services to Iran and other violations of US sanctions. But here’s a big problem with blocking $11 billion in annual exports to Huawei: It is a major customer for US chip makers, including two in Massachusetts.
Investors have sent semiconductor stocks reeling, and local heroes Skyworks Solutions (Woburn) and Analog Devices (Norwood) couldn’t avoid the blowback. Shares in Skyworks have plunged 11.2 percent since the Department of Commerce blacklist became public at the end of the day on May 15. Analog’s stock, meanwhile, is down 8.8 percent.
From a public relations standpoint, Huawei is a convenient target here, with minimal phone sales to consumers in the United States. (The company also provides equipment for some US rural carriers.) Huawei is a huge player in Europe and Asia, though, and has outpaced Apple in terms of global smartphone sales.
So what are the companies saying about this mess? Several days ago, a top Huawei executive in Europe has called this an unprecedented attack on global trade. When asked to provide a statement on Friday, the company took a calmer tone, saying simply that it’s hopeful the situation will be resolved and that it is “working to find the best solution.”
Executives at Analog and Skyworks either couldn’t be reached or declined to comment. Fortunately, both had earnings calls with analysts this month in which they publicly discussed their relationship with Huawei. The twist: The Skyworks call occurred before the blacklist, while Analog’s took place on Wednesday, after it took effect.
What a difference a few weeks can make. On May 2, Skyworks chief executive Liam Griffin and chief financial officer Kris Sennesael touted their relationship with Huawei. They said their business with Huawei is strong, especially given the softness in the overall Chinese market. (Huawei has been gaining market share there.)
The mood had soured considerably by the time it was Analog’s turn. CEO Vincent Roche and CFO Prashanth Mahendra-Rajah at first referred to Huawei enigmatically as just “a large communications company.” The Company That Cannot Be Named. The analysts on the call knew they were talking about Huawei and weren’t afraid to say it. Roche eventually told the analysts to count on zero revenue from Huawei — yes, Roche did actually slip and say the name — this quarter.
Skyworks and Analog may be our largest companies affected, but they’re probably not the only ones. China was Massachusetts’ second-largest export market, after Canada, last year. The semiconductor industry represents our biggest source of exports.
Yes, there are legitimate security concerns about the theft of intellectual property in China. Huawei has faced this line of criticism over the years. One example: a case involving T-Mobile trade secrets that is now being championed by the feds. The Trump administration also claims that Huawei’s technology could be used by the Chinese government to spy on Americans. (Huawei dismisses this as nonsense.)
But it’s hard not to see this offense against one of China’s biggest private companies as just another move in the perplexing chess game between China and the United States over trade. President Trump acknowledged as much on Thursday, saying Huawei could be a bargaining chip in the trade negotiations.
The Commerce Department last week decided to make some 90-day exemptions from its Huawei blacklist, but it seems too early to know whether the chip makers will benefit. As of Wednesday, Analog executives were still scratching their heads.
Vincent Roche, the CEO, succinctly summed up the general mood: “We’re as confused as everybody.”