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Friday, Aug 23, 2019

Micron finally resumes chip shipments to Huawei

Micron and other chipmakers suspended shipments to Huawei after the US government on May 15 added the world’s biggest telecoms equipment maker and 68 affiliates to an “Entity List”, banning it from acquiring components and technology from US firms without government approval.

tech Updated: Jun 26, 2019 16:45 IST
Micron says some Huawei shipments resumed, shares rise
Micron says some Huawei shipments resumed, shares rise (AFP)

Memory-chip maker Micron Technology Inc said it had resumed some shipments to China’s Huawei Technologies Co Ltd and still expected demand for its chips to recover later this year, sending its shares 10% late on Tuesday.

Micron Chief Executive Sanjay Mehrotra said the Idaho-based maker of chips for smartphones and other devices resumed shipping some chips in the past two weeks after it reviewed the U.S. ban on selling products to the China-based telecommunications company.

“We determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions,” Mehrotra said on a conference call with investors.

“However, there is considerable ongoing uncertainty surrounding the Huawei situation, and we are unable to predict the volumes or time periods over which we will be able to ship products to Huawei,” he added.

Micron and other chipmakers suspended shipments to Huawei after the US government on May 15 added the world’s biggest telecoms equipment maker and 68 affiliates to an “Entity List”, banning it from acquiring components and technology from U.S. firms without government approval.

The sanctions apply to goods that have 25% or more of U.S.-originated technology or materials and likely leave room for global suppliers, but many companies stopped shipments while they studied which components fell outside export control regulations.

ALSO READ: Here’s why building a smartphone without US tech is impossible

The New York Times on Tuesday reported, citing sources, that Intel Corp had also resumed shipping some products to Huawei. Intel declined to comment.

Micron on Tuesday beat analysts’ estimates for quarterly revenue and profit for the fiscal third quarter ended on May 30.

While the ban is expected to cost Huawei $30 billion in revenue this year, the company is still able to sell phones with stockpiled components - which some analysts say can last for another year.

Huawei said it had shipped 100 million smartphones this year as of May 30.


Mehrotra noted that Huawei was Micron’s No. 1 customer and that the ban cost the company as much as $200 million in missed sales during the third quarter.

“Although the market is weak right now, fears have been overdone,” Mark Newman, an analyst with Bernstein, told Reuters.

Micron had found ways to take advantage of a provision on labeling American-made goods to bypass the ban, the New York Times said.

The Semiconductor Industry Association, which is backed by Intel and Micron, said some chips did not fall under the U.S. government sales ban.

“As we have discussed with the U.S. government, it is now clear some items may be supplied to Huawei consistent with the Entity List and applicable regulations,” the association said.

“Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance.”

ALSO READ: In push to replace Huawei, rural US carriers are talking with Nokia and Ericsson

In an interview, Mehrotra told Reuters that Micron did not work with other chipmakers or the U.S. government to conclude some chips could be shipped to Huawei, but rather had its own lawyers, as well as external attorneys, review publicly available regulations.

“Micron independently came to its determination that certain of our products were OK to ship,” Mehrotra said.



Stocks in chipmakers have fallen in recent months as demand for smartphones has declined and prices for DRAM and NAND memory chips sank due to oversupply, adding to concerns that a two-year-long semiconductor upswing was coming to a halt.

To soften the blow, Micron reduced its output to prop up prices and has invested more in its next generation of chips. The company said on Tuesday it would cut output by as much as 10% to help bring its supply in line with demand.

But Micron executives said they expected demand for its chips to recover in the second half of 2019. The company estimated fiscal fourth-quarter revenue largely in line with analysts’ estimates.

The company further clamped down on capital expenditures, a closely-watched metric in the cash-intensive chipmaking business. Micron said that fiscal 2020’s capital expenditures would be less than the $9 billion it expected to spend in fiscal 2019, well below its initial plans to spend $10.5 billion.

Quarterly revenue fell to $4.79 billion from $7.80 billion, beating analysts’ estimates of $4.69 billion, according to I/B/E/S data from Refinitiv.

On an adjusted basis, the company earned $1.05 per share. Analysts were expecting a profit of 79 cents per share.

First Published: Jun 26, 2019 16:45 IST

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