StockBeat - Semis Swoon as Huawei Gets Caught Up in US-China Crossfire Again

Investing,com - President Trump took aim at key Chinese chip customer Huawei Friday and said it was “fine” if the U.S. pulls out of trade talks with China planned for September. But investors in semis disagree and have pushed many chips lower, led by a slump in Micron (NASDAQ:MU).

“We are not going to do business with Huawei... And I really made the decision. It’s much simpler not doing any business with Huawei...That doesn’t mean we won’t agree to something if and when we make a trade deal,” President Donald Trump said.

Huawei-exposed semi suppliers, including Micron Technology (NASDAQ:MU) and Intel (NASDAQ:INTC) fell about 2% each on fears that they may have to halt shipments to Huawei – a move that could not only hurt orders but exacerbate the chip inventory overhang that has plagued the sector.

The Philadelphia Semiconductor Index was off nearly 1% as well. The index is down 0.8% this week and 7% on the month. It is still up more than 28% on the year.

After banning U.S. companies from using telecom infrastructure from Huawei in May, citing national security concerns, Trump lifted the bans in July.

The sea of red in semis comes less than a month after a trio of chip heavyweights, including Taiwan Semiconductor (NYSE:TSM), Texas Instruments (NASDAQ:TXN) and Intel (NASDAQ:INTC) had delivered better-than-expected quarterly reports and indicated that chip demand could improve in the second half of the year.

While one trade war threatens to leave a wreck in its wake, particularly on semis, another is giving the sector a much needed boost – the Japan-South Korea trade war.

Last month, Japan imposed export restrictions on South Korea, which controls about 70% of the global market for dynamic random access memory (DRAM) and 50% for NAND flash memory. Samsung Electronics (KS:005930) alone controls about 40% of the market for DRAM chips.

The move has raised fears of a supply shortage, prompting a rebound in memory prices, which have remained low for about a year.

South Korea’s strong grip on the global memory market has led some to suggest the hysterics about the impact on semis from the U.S.-China war is overstated somewhat; the bigger problem is the glut in memory supplies.

“Most of the softening you see today is dominated by the memory pricing. I think as ... the correction and capacity question takes place, probably the pick-up will start again early part of 2020,” said Ajit Manocha, CEO at chip industry association, SEMI.

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