Broadcom CEO Expects Trade War’s ‘Twists and Turns’ to Extend Into 2020

Though the U.S.-China trade war continues with no end in sight, the good news for Broadcom’s semiconductor segment is that “we have not seen further deterioration in our business" since last quarter, said CEO Hock Tan on a fiscal Q3 call Thursday. That prompted Broadcom to leave unchanged its forecast, downgraded on its June call from the $2 billion hit from the trade war (see 1906140011), of $17.5 billion in semiconductor revenue for the fiscal year ending in November, said Tan. “Visibility” into the next fiscal year “continues to be very limited on the semiconductor side,” he said. “So we are managing the business with an expectation that we will continue to operate in a very low-growth, uncertain macro environment for the foreseeable future.” The trade war “is turning into an extended affair with lots of twists and turns in uncertainty,” said Tan. “We are assuming” trade conditions next fiscal year are “not going to change from what we're seeing now,” which means “you probably see a very uncertain 2020,” he said. Broadcom is at least three months away from being able to give clearer 2020 guidance, “but as we sit here right now,” it appears “we have hit bottom” in the semiconductor business, he said. “We're kind of staying at the bottom.” There’s not “much clarity or visibility yet or certainty that any sharp recovery is around the corner,” he said. The stock closed 3.1 percent lower Friday at $290.32. The “fundamentals” of Broadcom’s semiconductor business “remain strong,” said Tan. “We continue to benefit from the underlying trend in the IT world and insatiable need for increasing bandwidth to connect things.”