US-China Trade War on ‘Tip of Almost Every Customer’s Tongue,’ Says Photronics CEO

It’s “undeniable” that “uncertainty” in China has increased as the U.S.-China trade war “escalated,” said Photronics CEO Peter Kirlin on a fiscal Q3 call Tuesday. Demand for the photo masks that Photronics supplies to the display industry is “design-driven” and “not necessarily” tied to unit sales of displays, he said. But “uncertainty can cause some customers to become more cautious and slow the rate of new product releases, thus impacting our business,” he said. China is 53 percent of Photronics flat-panel display revenue, he said. Kirlin thinks the trade war's “long-term” impact will be “a significant positive for our business,” because it significantly raises the opportunities of Chinese customers “to fully localize their supply chain,” he said. The short-term impact will be negative, but it’s “hard to really gauge in the next few months what the real impact looks like, because it’s a dynamic situation,” he said. Kirlin spent the first two weeks of August visiting customers in China, he said. Two or three months ago, the trade war “really wasn’t present in the active dialogue,” he said. “Now it’s on the tip of almost every customer’s tongue.” The threat of the 10 percent List 4 Section 301 tariffs, which President Donald Trump announced Aug. 1 on Twitter (see 1908010059), “was hanging out there regarding the largest export market,” the CEO said of Chinese customers selling goods to U.S. importers. “Who knows what tomorrow’s Twitter feed will bring?” Tariffs take effect Sept. 1 on finished TVs from China, but duties on smartphones, laptops, tablets and other consumer tech goods were deferred to Dec. 15 (see 1908130028).