Broadcom sent a shockwave through the global chip making industry on Friday with its forecast that US-China trade tensions and the ban on doing business with Huawei Technologies would knock US$2 billion off the company's sales this year.
The forecast, included in the company's second-quarter results late on Thursday, was the hardest evidence yet of the damage President Donald Trump's trade war with Beijing may do to the global industry.
Shares in Broadcom fell as much as 8.6 per cent, wiping more than US$9 billion off the market value of the company, previously based in Asia but now with its headquarters and main listing in the United States.
US chip-makers Qualcomm, Applied Materials, Intel, Advanced Micro Devices and Xilinx were all down between 1.5 per cent and 3 per cent.
The Philadelphia chip index was down nearly 3 per cent with 29 of its 30 components trading lower. Shares of other Huawei suppliers like Analog Devices, Skyworks Solutions and Qorvo also fell.
European peers including STMicroelectronics, Infineon and AMS ended the day lower.
"We'll see a very sharp impact simply because (there are) no purchases allowed and there's no obvious substitution in place," chief executiver Hock Tan said on a post-earnings call with analysts on the Huawei ban.
Huawei accounted for about US$900 million, or 4 per cent, of the company's overall sales last year. Broadcom, however, also said the forecast cut "extends beyond one particular customer."
"We're talking about uncertainty in our marketplace, uncertainty because of the - of demand in the form of order reduction as the supply chain out there constricts - compress, so to speak," Tan said.
The semiconductor industry has been grappling with slowing demand since the second half of 2018 with bellwether Texas Instruments warning in April that a cyclical downturn could last for another two years.
That has related chiefly to signs that mobile phone markets in some major economies are increasingly saturated while mass demand in new areas like self-driving cars and internet of things devices for homes and offices is still developing.
The geopolitical risks from the trade conflict and Huawei ban are an additional shock.
Broadcom, known for communications chips that power Wi-Fi, Bluetooth and GPS connectivity in smartphones, is also a major supplier to Apple and shares of the iPhone maker were down one per cent.
"We believe Broadcom's 2H19 outlook is not only impacted by the direct Huawei export ban, but also includes the indirect impact from the Huawei export ban to other customers as well as the possible industry-wide impact of the possible additional import tariffs," Summit Insights Group analyst Kinngai Chan said.
Finisar, which makes sensors for facial recognition, transceivers and other components for telecommunication networks, said in a regulatory filing that ban on Huawei could have continuing negative impact on its future revenue. Huawei represented 10 per cent of its total revenue in fiscal 2019.
The CEO of chip maker Micron Technology also said the ban on Huawei brings uncertainty and disturbance to the semiconductor industry.
Micron will report its third-quarter results on June 25.
"I think you have seen all the companies (Qorvo, Skyworks, Maxlinear, Cree, Inphi, Lumentum, NeoPhotonics) which pre-announced negative for about half their quarter's impact due to this Huawei export ban," Chan said.
"The issue now is that there will be a second degree (indirect) impact as well that most companies do not want to talk about. We believe the next wave of companies that should be echoing what Broadcom says are Micron and Western Digital," Chan added.
(Reporting by Helen Reid in London, Arjun Panchadar, Vibhuti Sharma and Sayanti Chakraborty in Bengaluru; Editing by Josephine Mason, Susan Fenton and Patrick Graham)