Huawei is once again at the center of an ongoing storm between the United States and China.
Burnt earth around Huawei
Last year, the Commerce Department added the Chinese telecommunications giant to the Entity List, limiting Huawei's hardware and software exports by American companies.
And now, Taiwan Semiconductor Manufacturing has reportedly stopped taking orders from the Chinese company. This occurred after the U.S. activated tighter export controls which now require a license from all foreign chip makers using American equipment, software or intellectual property, before selling to Huawei.
This development is entering a negative moment for mobile chip makers such as Taiwan Semiconductor. The outbreak of COVID-19 has disrupted sales and supply chains. But there are two chipmakers who could emerge relatively unscathed from the Commerce Department's latest move: Skyworks Solutions (NASDAQ: SWKS) and Qorvo (NASDAQ: QRVO).
Skyworks Solutions and Qorvo beyond Huawei
The addition of Huawei to the Entity List last year had destroyed the momentum of Skyworks which had trusted the Chinese giant for 12% of its revenue. Skyworks pointed out that second-quarter revenue would increase 4% year-on-year, but interruptions with Huawei led to a 5% drop.
The good news is that Skyworks' addiction to Huawei has diminished since last year. With Huawei-related activities included, Skyworks' mobile revenue has been stable year after year since the gains in content in 5G smartphones have been offset by the loss of activity in Huawei.
This also indicates that if the chipmaker were to lose Huawei's business as a whole, its mobile business (accounting for 70% of total revenue) would still be able to generate growth as the company is looking to earn business with other manufacturers.
The chipmaker also supplies 5G chips to Samsung's current flagship device. This is another positive aspect for Skyworks, as Samsung leads the 5G smartphone space with a market share of just over 34%.
Finally, Skyworks' largest customer, Apple, which accounts for about half of its total revenue, is preparing to launch a range of 5G smartphones later this year.
As with Skyworks, Apple is also the main customer of Qorvo and provides 30% of total revenue. Qorvo also supplies 5G chips to Samsung, Xiaomi and Vivo. More importantly, Qorvo has reduced its dependence on Huawei by a substantial margin over the past year.
In the latest earnings conference call, Qorvo pointed out that Huawei is expected to account for less than 5% of the chipmaker's revenue this quarter. In addition, Qorvo has another way to compensate for this loss: the 5G infrastructure market.
Huawei shares (002502.SZ) show a change of -20,64% in the last year and, at the time of writing, are trading at 2,75 CNY in the Shenzen market.
