Semiconductor companies expect weaker Q4 2018
Semiconductor companies have started to feel the impact of the US-China trade war. In September, memory chip maker Micron Technology (MU) reported weaker guidance for the November quarter for several reasons, one of which was tariffs. It stated that the new tariffs would reduce its gross margin by 50–100 basis points.
At the Citi Global Technology Conference in early September, analog chip maker Analog Devices (ADI) reported weakness in the industrial sector, which analysts believe is due to the trade war. At the same conference, microcontroller supplier STMicroelectronics (STM) stated that its order bookings are “volatile.”
Semiconductor stocks fall
The negative impact of US tariffs on semiconductor industry saw the VanEck Vectors Semiconductor ETF (SMH) fall 2.4% between September 24 and 26, with individual semiconductor stocks Intel (INTC), ADI, and STM falling 2.6%, 2.8%, and 1.1%, respectively. The second round of tariffs was levied on September 24.
Short-term volatility in semiconductor stocks
The US and China tariffs have created uncertainty in the global market environment affecting everyone from manufacturers to consumers. Some financial planners are advising investors to re-check their portfolios and protect themselves in areas exposed to tariffs.
According to CNBC, Blue Ocean Global Wealth CEO Marguerita Cheng warned technology investors that the sector could be more volatile, as it’s susceptible to tariffs and legislative risks beyond their control. She added that technology manufacturing companies would be more susceptible to manufacturing rules than technology service companies.
Lassus Wherley president Diahann W. Lassus stated that individual technology stocks and technology ETFs could be risky and advised investors to evaluate their investments and cash out on profits.
However, some financial planners are long on technology stocks, as they believe that technology presents a long-term growth opportunity with revolutions like 5G (fifth-generation), AI, autonomous vehicles, and IoT defining the future.
In the next few parts of this series, we’ll see how tariffs would impact some large semiconductor companies.
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