Sansaar
HomeNewsWorldChina eco uncertainty a potential risk for US chipmakers

China eco uncertainty a potential risk for US chipmakers

Consumer electronics giant Apple Inc could also be vulnerable - 17 percent of the company's overall revenue last fiscal year came from China, and in the most recent quarter it sold more iPhones in the country than in the United States for the first time.

July 07, 2015 / 08:17 IST

Tumbling markets and economic uncertainty in China pose a risk to major chipmakers such as Qualcomm Inc that derive a big portion of their sales from the world's second-largest economy.

Consumer electronics giant Apple Inc could also be vulnerable - 17 percent of the company's overall revenue last fiscal year came from China, and in the most recent quarter it sold more iPhones in the country than in the United States for the first time.

But the slowing pace of China's economic growth - on top of already weakening demand for mobile devices - could deliver a particularly tough blow to chipmakers, analysts said.

"When you have waning demand hitting at the same time (as the stock market uncertainty), it just makes that industry that much more difficult," said Christopher Rolland, a senior equity analyst at FBR Capital Markets & Co.

Beijing took steps during the weekend to revive shares following a 30 percent slide in its stock market since mid-June, which raised investors' concerns about the stability of the Chinese economy.

Among the companies with the biggest exposure to China are Qualcomm and fellow chipmaker Broadcom Corp , which depend on China for 50 percent and 24 percent of their overall revenue, respectively.

Qualcomm declined to comment ahead of its earnings announcement, and a Broadcom representative was not immediately available to comment. Apple declined to comment.

China's stock market stumble comes as the chip sector was already facing a tough year. Research firm Gartner said it is downgrading its assessment of worldwide semiconductor sales, which it had initially expected to reach USD 354 billion this year, a 4 percent increase from 2014, although it has not yet released its new assessment.

However, the situation may not be as dire as the revenue numbers indicate. Exposure to China may be smaller than the companies' reports suggest, according to Cody Acree, an analyst for Ascendiant Capital Markets.

For instance, Cirrus Logic Inc , which supplies integrated circuits for audio and automotive applications, reports that it made nearly 80 percent of its revenue in China last year.

But the company said the number represents where its products are manufactured and not necessarily the end-market where products are sold. The company said it did not currently see any impact on its business.

first published: Jul 7, 2015 08:17 am

Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Subscribe to Tech Newsletters

  • On Saturdays

    Find the best of Al News in one place, specially curated for you every weekend.

  • Daily-Weekdays

    Stay on top of the latest tech trends and biggest startup news.

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347