The semiconductor market got a boost following the administration’s decision on June 29 to allow U.S. chipmakers to supply products to Chinese technology giant Huawei. Industry lobbyists had argued that restricting free trade by blacklisting Huawei would have hurt the U.S. economy.
“I’ve agreed — and pretty easily — I’ve agreed to allow (Huawei) to continue to sell that product so American companies will continue,” the president said at a press conference over the weekend. “The companies were not exactly happy that they couldn’t sell because they had nothing to do with whatever was potentially happening with respect to Huawei. So I did do that.”
Despite the green light, confusion remains over some of the president’s remarks. He later said that chipmakers could sell Huawei “equipment where there is no great national emergency problem with it” but didn’t define what would constitute a “national emergency.” The industry is expecting additional clarification from the administration.
Nonetheless, the decision marks a significant win for the semiconductor industry, the fourth-largest U.S. exporter. China’s imports of semiconductors have been on the rise, more than doubling in the last decade (see figure 1); they now represent approximately a third of global revenue for chipmakers.
Chipmakers post strong summer results, but hurdles remains
The exciting news for U.S. chipmakers tops off a great month for the industry, as the Philadelphia Semiconductor Index recovered from a significant May sell-off following news that April semiconductor sales fell 17.7% (highlighted in figure 2). May sales rose to $33 billion, up 7% from April, according to the Semiconductor Industry Association.
Even though the index—a capitalization-weighted index composed of 30 semiconductor companies—posted intraday gains before falling by 1.4% on July 2, concerns for the industry remain. The index is within 10% of record-high levels and the market is noticeably slowing. May sales represented a 15% decline from the prior year. Additionally, until the United States and China reach an agreement on trade and an end to tariffs, an “uncertainty tax” hangs over the United States, the largest supplier of chips, and China, their largest buyer.