(Bloomberg) -- The combination of 25% tariffs on Chinese goods and the U.S. blacklisting Huawei Technologies Co. is likely to spark a round of earnings warnings across the semiconductor industry, according to Raymond James.
“We would expect that many, if not most, semiconductor companies will need to lower estimates,” analyst Chris Caso said in a note to clients. Lumentum Holdings Inc.’s forecast cut on Monday was probably the first of many to come, he said. Qorvo Inc. followed suit Tuesday morning. Other companies with significant exposure include Xilinx, Analog Devices, Broadcom, Intel, Nvidia and Skyworks Solutions.
Raymond James expects that Huawei accumulated significant inventory -- as much as one year’s worth -- in anticipation of a ban and will need to go through this before shipments of components resume. At the same time, the risk goes beyond just Huawei suppliers as taken together with increased tariffs and the potential for retaliation by China, the current downturn facing the semiconductor industry is likely to be longer and more severe than previously expected. The supply chain may freeze as companies wait for some resolution.
While all this hasn’t made semiconductor stocks “univestable” yet, Caso said once investor sentiment is bad enough and estimates fall again, that will be a good time to buy. The Philadelphia semiconductor index shrugged off such concerns, rallying as much as 2.6% as it snapped a three-day losing streak on Tuesday.
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