Broadcom pulls annual sales forecast on virus uncertainty

The California-based company makes chips for Apple, Samsung and Huawei

Broadcom's sales in the first quarter of fiscal 2020, which ended on February 2, rose to $5.86bn. Reuters

Broadcom, a chipmaker that supplies Apple and other large electronics companies, withdrew its annual sales forecast and gave weak near-term guidance, demonstrating how deeply the coronavirus pandemic is poised to hurt demand.

“The fundamental semiconductor backdrop has been improving, and we did not see any material impact on our businesses due to Covid-19 in our first quarter,” chief executive Hock Tan said in a statement.

“However, visibility in our global markets is lacking and demand uncertainty is intensifying. As a result, we believe it prudent to withdraw our annual guidance until visibility returns to pre Covid-19 levels.”

Sales in the current quarter will be $5.7 billion (Dh20.9bn), plus or minus $150 million, the company said. That missed Wall Street expectations. Mr Tan said during a conference call with analysts that the quarterly target is largely in line with normal seasonal trends.

While Broadcom’s supply chain is unscathed by the virus so far, the chief executive said it’s impossible to assess yet how much consumer demand for electronics will decline.

Broadcom is one of the largest technology companies so far to describe how its business is performing in the midst of the coronavirus health scare. Rising infections shut factories in China for weeks, disrupting trade and global supply chains, while curbing demand for hardware and software.

The California-based company makes chips for iPhones. Earlier this year, Apple scrapped its revenue guidance for the March quarter because of slowdowns in production and declining demand for its products after stores were closed in China.

The fallout from Covid-19 comes as Broadcom, and other chipmakers, were already suffering from a trade dispute between China and the US. The company has been a major supplier to Huawei, but the Donald Trump administration has forbidden US companies from selling to the Chinese company.

About a third of Broadcom’s products go into devices that are either bought in China or exported from China around the world.

Mr Tan has built Broadcom into one of the biggest semiconductor makers through a string of deals. With customers including Apple and Samsung, Broadcom results are closely watched by investors.

The company decided to keep investing in its wireless unit, ending speculation about a potential sale. In January, Broadcom reported new long-term supply agreements with Apple.

Mr Tan said he changed his mind because of the certainty provided by a new customer commitment.

Sales in the first quarter of fiscal 2020, which ended on February 2, rose to $5.86bn, the company said.