Broadcom expects its semiconductor business to take a $2 billion revenue hit from the U.S.-China trade war, including the Trump administration's "Huawei export ban,” said CEO Hock Tan on a fiscal Q2 call. The stock closed 5.6 percent lower Friday at $265.93. The trade frictions are “creating economic and political uncertainty and reducing visibility for our global OEM customers,” he said. “Demand volatility has increased and our customers are actively reducing inventory levels to manage risks.” The $17.5 billion in semiconductor revenue Broadcom now expects in the fiscal year ending in November will mean a year-over-year decline in the high-single digits, said Tan. On Broadcom’s previous earnings call in March, Tan had said he was “confident” the semiconductor business would “resume very meaningful growth” in the fiscal second half and record $19.5 billion in sales. Huawei generated about $900 million of revenue for Broadcom last year, but the market softness that prompted the company to shave $2 billion off its semiconductor revenue forecast “obviously extends beyond just one particular customer,” said Tan Thursday, in Q&A. “We're talking about uncertainty in our marketplace,” and that’s causing “compression” in the supply chain that’s reducing orders, he said. “It's broad-based.” With the revised forecast, “we tried to capture everything” in the business “environment,” including the impact of the proposed List 4 tariffs on Chinese goods, said Tan. The environment “is very, very nervous, and that's why we see a very, very sharp and rapid contraction of the supply chain and orders out there from our customers,” he said.

FCC Chairman Ajit Pai stressed the importance of 5G security in a speech Wednesday at the U.S.-India Business Council India Ideas Summit. “Implications are wide-ranging,” Pai said: “5G will affect our militaries, our industries, our critical infrastructure, and much more. The procurement and deployment decisions made now will have a generational impact on our security, economy, and society.” In the world of 5G, “We cannot afford to make risky choices and just hope for the best,” Pai said. “We must see clearly the threats to the security of our networks and act to address them. And the more that allies like the United States and India can work together and make security decisions based on shared principles, the safer that our 5G networks will be.”

Senate Intelligence Committee Vice Chairman Mark Warner, D-Va., and Sen. Marco Rubio, R-Fla., urged President Donald Trump's administration Thursday not to use U.S. restrictions on Huawei as a “bargaining chip in trade negotiations” with China. Trump's May executive order bars some foreign companies' technology from U.S. networks and the Commerce Department's Bureau of Industry and Security filed a notice adding Huawei and affiliates to a list of entities subject to export administration regulations (see 1905160081). BIS issued a general license temporarily allowing certain transactions by Huawei and the affected affiliates through Aug. 19 (see 1905210013). Trump later said sanctions against Huawei could be part of trade negotiations with China (see 1905240038). OMB acting Director Russel Vought later requested a two-year delay in implementing government contracting and procurement-related restrictions on Huawei included in the FY 2019 National Defense Authorization Act (see 1808130064). “Europeans have publicly expressed fears that the Administration will soften its position on Huawei,” especially given Trump's instigation of a settlement that lifted the Commerce Department ban on U.S. companies selling telecom software and equipment to Chinese firm ZTE (see 1807130048), Rubio and Warner wrote Secretary of State Mike Pompeo and U.S. Trade Representative Robert Lighthizer. “Instead, the U.S. should redouble our efforts to present our allies with compelling data on why the long-term network security and maintenance costs on Chinese telecommunications equipment offset any short-term cost savings.” Any modifications to BIS' temporary general license for Huawei “must be pursued in a risk-based way, separate from any trade negotiations, and consistent with national security considerations,” the senators said. “Conflating national security considerations with levers in trade negotiations undermines” U.S. work with Europe, India and other “international partners.” The House Armed Services Committee, meanwhile, Thursday advanced its version of the FY 2020 NDAA with language directing the defense secretary to conduct a comprehensive assessment of DOD policies on telecom and video surveillance services and equipment from foreign contractors and subcontractors, including identifying ways to mitigate threats via the debarment and suspension process. The bill would direct the defense secretary to implement a strategy for 5G technologies. It recommends giving DOD $175 million to ensure effective Joint Force operations in 5G spectrum.

Short-term risks from U.S. restrictions on gear from China-based Huawei would be felt more by tech companies than telecoms, due to more direct and near-term revenue impact, reported S&P Global Ratings Wednesday. Expecting further developments in the trade war between the U.S. and China, the researcher said the impacts of bans “are not yet certain.” The ban on China-based ZTE last year lasted four weeks but “may not be indicative of the outcome on Huawei,” said S&P, which believes the ban will be a “catalyst” for the Chinese company and the government to “accelerate their technology to reduce reliance on foreign suppliers for critical components.” That could ratchet up competition in the technology sector and lower long-term growth prospects for U.S. tech firms, it said. Tuesday, Silicon Labs Chief Financial Officer John Hollister said (see 1906110068 or 1906110058) the May Commerce Department Bureau of Industry and Security notice banning shipments to Huawei will have “half a quarter impact” on Q2 revenue. Consequences for telecom companies will vary by country, relating largely to long-term 5G investment decisions, giving operators “more time and options for managing the fallout,” said S&P's Mark Habib. With China aiming for leadership in 5G, “stakes are high” because deployment will be key to “a vibrant economic environment” for countries and regions, the analyst said. Using history as a guide, Habib said leaders will have an edge in the development of the next wave of technology innovations such as cloud computing, IoT and autonomous vehicles. “It's too early to tell if restrictions will slow China's 5G ambitions, or backfire and leave countries like the U.S. behind,” he said. Much will depend on “how badly Huawei is constrained and how ready competing equipment makers are to take the lead.”

The May Commerce Department Bureau of Industry and Security notice banning shipments to Huawei will have “half a quarter impact” on Silicon Labs' Q2 revenue since the company’s late April guidance, said Chief Financial Officer John Hollister at a Tuesday investor conference. Hollister called Huawei a “3 percent customer” generating $6 million quarterly revenue in its infrastructure business. He pegged IoT revenue potential, the most robust part of the “opportunity pipeline,” at $8 billion, mostly in wireless. CEO Tyson Tuttle said Silicon Labs is “furthest along” among competitors in small-scale wireless-enabled devices, a market that could reach 80 billion-100 billion devices deployed by 2025. “If you just come in and do one chip or one piece of the software, you’re really missing the big story of what the opportunity is,” he said, pushing the company’s breadth in software and devices.

FCC commissioners are to vote on petitions to reconsider submarine cable outage reporting rules, under a Public Safety Bureau item circulated May 31. The commission revised rules in 2016 requiring network operators to report undersea cable outages more frequently (see 1606230058) despite industry concerns about potential undue burdens (see 1609090001). The FCC did not comment further on Monday.

The Commerce Department plans to issue an advance NPRM for export controls on foundational technologies in coming weeks, said Rich Ashooh, assistant secretary-export administration, at a Bureau of Industry and Security Regulations and Procedures Technical Advisory Committee meeting. Hillary Hess, director of Commerce’s regulatory policy division, said only “it is in the process now.” BIS recently updated the commerce control list (CCL) with five new emerging technologies (see 1905230018). Hess and others previously said BIS was behind in publishing controls on emerging and foundational technologies due to the partial federal government shutdown and the large volume of comments. Tuesday, Ashooh said BIS plans to stagger notices about emerging and foundational technologies, and Hess said it plans to release the ANPRM before any more emerging technologies are added to the CCL. Ashooh said he will try to give “a little more” time for comments on the foundational technology notice but it may not be possible. When Ashooh last asked Commerce Secretary Wilbur Ross for a public comment extension, Ross “very grudgingly” agreed, Ashooh said. “It’s a fast-moving administration,” he said, “and I’m sure that will still apply.” Ashooh said the ANPRM for foundational technologies will be a “very different thought process” from the previous notice for emerging technologies, but will offer another opportunity to communicate with BIS: “Those of you who provided comments on emerging, whatever you didn’t get to say in emerging, you can say in foundational.” Hess said BIS must wait for OMB to OK the ANPRM, which can take up to 90 days. But Hess said usually the OMB “doesn’t take that whole time.” Commerce won't provide straightforward definitions of foundational or emerging technologies in an upcoming notice, said both speakers. “Emerging technologies defies a specific definition,” Ashooh said. The technologies that fit under the emerging technologies category will be defined “on a rolling basis” as they’re proposed. Hess said BIS won’t try to place rigid definitions on any technology category but instead try to “identify the technical parameters.” Commerce looks for a common thread when identifying emerging or foundational technology exports that may be candidates for the CCL, Hess said.

The U.K. and the U.S. will agree on the best approach to Huawei, President Donald Trump said Tuesday at a news conference after meeting with British Prime Minister Theresa May. Experts say the U.S. will get limited support from other countries for its campaign against the Chinese equipment maker (see 1905290036). “We’re going to have absolutely an agreement on Huawei and everything else,” Trump said: “We have an incredible intelligence relationship and we will be able to work out any differences.” He says sanctions against Huawei could be part of trade negotiations with China (see 1905240038). Monday, Secretary of State Mike Pompeo warned European nations on Huawei. “Those comments would appear to undermine the arguments that Secretary Pompeo has been making about Huawei,” Zack Cooper, China expert at the American Enterprise Institute, told us. “This is reminiscent of the tough stance that the Trump administration took against ZTE, only to see the pressure taken off by the president. I think many observers will expect a similar dynamic to occur on Huawei, if a U.S.-China trade deal is eventually negotiated."

Canalys expects 2019 smartphone shipments to decline 3.1 percent to 1.35 billion, a downgrade necessitated by trade "uncertainties" including the Trump administration's May 15 executive order on Huawei. The forecast assumes stringent restrictions will be imposed on Huawei, after a 90-day reprieve, and will have a “significant impact on the company’s ability to roll out new devices short term, especially outside of China.” Canalys said Huawei is acting to mitigate the effect of component and service supply issues but expects overseas potential to be “hampered for some time.” Market uncertainty is "prompting vendors to accelerate certain strategies to minimize the short- and long-term impact in a challenging business environment, for example, shifting manufacturing to different countries to hedge against the risk of tariffs,” said analyst Nicole Peng: “With recent US announcements on tariffs on goods from more countries, the industry will be dealing with turmoil for some time.” Canalys sees other major smartphone vendors, led by Samsung, having short-term opportunities “while Huawei struggles.” Samsung’s "aggressive device strategy" and ability to ramp production quickly will give it an advantage, but it may “struggle to entirely fill the shortfall,” said analyst Rushabh Doshi, saying other vendors won’t be able to react to new opportunities until late 2019. By next year, most of the major mobile supply chain will have active contingency plans to mitigate Huawei’s decline and be ready for 5G device rollout, Doshi said. Smartphone shipments globally are expected to return to “soft growth” in 2020, rising 3.4 percent to 1.39 billion.

The U.S. temporary general license after it added Huawei to its entity list was “almost no relief” for America's semiconductor industry, which has been hurt severely by the move, said Semiconductor Industry Association CEO John Neuffer. At a Washington International Trade Association discussion last week, Neuffer underscored the importance of the Chinese market to U.S. semiconductor exporters and said the Trump administration should more tactfully negotiate with China. “We would like the U.S. government to better balance its national security concerns with its economic security concerns,” Neuffer said. He said there's an inaccurate perception chipmakers were aided by the Commerce Department Bureau of Industry and Security's temporary move (see 1905290036). “It leaves a major hole for us,” Neuffer said, noting Huawei is one of the “world’s biggest” telecom gear and cellphone providers. “There’s basically no reprieve.” If China’s expected June 1 tariff increase affects U.S. consumer goods including computers and cellphones, which had previously been kept off the tariff lists, Neuffer said his industry will suffer significant losses, partly because China is a large portion of that industry's export market. “Because they are our customers,” Neuffer said, “we will get hit and so will the American consumer.” Neuffer said any U.S.-China decoupling is a “folly,” and the Trump administration’s desire to bring all U.S. supply chains back to the U.S. is “not realistic.” The White House didn't comment Friday.