U.S. chip stocks (and spirits) were boosted over the weekend by renewed trade talks between the U.S. and China and the apparent relaxation of sanctions.
SAN FRANCISCO — Chip stocks surged Monday, the first day of trading after Trump and China President Xi Jinping met at the G20 Summit in Osaka, Japan, and agreed to new trade negotiations and a hold on imposing new tariffs. Intel and Qualcomm rose, but the companies that are noted suppliers to Huawei, such as Broadcom, Skyworks Solutions, Qorvo and Micron Technology, especially needed the rebound. Overall, the Philadelphia SOX semiconductor index rose nearly 2.7% Monday.
"The progress made today by President Trump and President Xi in Osaka is good news for the semiconductor industry, the overall tech sector, and the world’s two largest economies," said Jon Neuffer, president and CEO of the Semiconductor Industry Association (SIA), in a statement released on Saturday. "We are encouraged the talks are restarting and additional tariffs are on hold and we look forward to getting more detail on the president’s remarks on Huawei.”
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Days later, detail remains lacking. The semiconductor industry is relieved now that talks between the U.S. and China are resuming, but of course the outcome of new trade negotiations is far from assured.
On Saturday, Trump referenced lobbying efforts on behalf of U.S. component suppliers regarding the Huawei ban and said — in an apparent overture to Xi — that U.S. companies could sell their "high tech" products to Huawei as long as it didn't create a “great, national emergency problem.”
It remains unclear what products U.S. companies will be able to resume supplying to Huawei, which was placed on an export blacklist last month over U.S. national security concerns.
Analysts and semiconductor industry insiders were scrambling Monday to try to interpret Trump's comments on Huawei. Trump Administration officials said Monday that the most likely scenario would be the issuance of more licenses to enable U.S. firms to sell some products to Huawei.
The renewed trade talks and Trump's apparent about-face on Huawei come two weeks after the by Office of the U.S. Trade Representative wrapped up a series of hearings on the administration's proposal to impose tariffs on about $300 billion more worth of Chinese products. Not surprisingly, U.S. companies from Apple to Walmart have come out in opposition to tariffs, with more than 500 companies and 140 industry groups signing an open letter to Trump earlier this month asking him to reconsider his tariffs.
On June 19, four traditional U.S. PC industry heavyweights — HP, Dell, Microsoft and Intel — banded together to issue a joint statement, saying that though they recognize and appreciate Trump's efforts address unfair practices, the proposed tariffs on laptops and tablets "threaten to disproportionately harm multiple U.S. interests, including small and medium-sized businesses, a wide range of consumers, and device manufacturers." The group, citing a study released earlier this month by the Consumer Technology Association, said the proposed tariffs would increase U.S. prices for laptops and tablets by at least 19%, or around $120.
The SIA, like virtually every U.S. trade group, supports Trump's aims of cracking down on China's trade practices — including forced technology transfers and lax IP protection — but continues to argue that the tariffs imposed on semiconductors and the semiconductor supply chain hurt U.S. chipmakers and do nothing to curb China's trade practices at issue.
Devi Keller, director of global policy at SIA, testified at one of the U.S. Trade Representative hearings that the tariffs were ill-equipped to address the issues at hand. Keller testified that the semiconductor test, packaging and assembly performed in Asia — including China — represents only about 10% of the value of a semiconductor. Addition tariffs, she argued, could have crippling effects on the U.S. semiconductor industry and U.S. IT as a whole.
"What we're looking at now, with all four [tariff] lists, is you're seeing the entire semiconductor ecosystem covered by tariffs both downstream and upstream and our view is that's going to have a very crippling impact," Keller said in a subsequent interview with EE Times.