In trade war with China, US chipmakers could be the biggest casualties


David Paul Morris | Bloomberg | Getty Images

Brian Krzanich, chief executive officer of Intel Corp., holds up a 49-qubit superconducting quantum test chip named ‘Tangle Lake’ while speaking during a keynote address at the 2018 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Monday, Jan. 8, 2018.

By revenue, chipmakers face the greatest risks in escalating trade tensions with Beijing.

Among U.S. industries, semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52 percent, Morgan Stanley equity strategists said in a June 12 report.

Chipmaker Qualcomm has 65 percent revenue exposure to China, and optical components manufacturer Lumentum has 23 percent exposure, the report said in a list of 20 stocks most sensitive to China.

Source: Thomson Reuters, Morgan Stanley Research Estimates

U.S. stock indexes fell sharply after a renewed war of words over tariffs between the Trump administration and Beijing.

Telecommunications equipment maker Lumentum skidded 4.9 percent Tuesday morning, and shares of major chipmakers tumbled. Qualcomm and Micron fell more than 1.5 percent, while Intel dropped more than 2 percent. Broadcom fell about 2.3 percent, and Skyworks Solutions traded 2.2 percent lower.

Last week, the Trump administration said 25 percent tariffs on $34 billion worth of Chinese imports will take effect July 6. Beijing quickly retaliated with duties on $34 billion worth of American goods that will also go into effect July 6.

If China does not change its practices and goes through with the tariffs, the U.S. will impose more tariffs, President Donald Trump said late Monday. He has asked the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs of 10 percent. Beijing responded by saying China will protect its interests.

China’s list of tariffs released Friday primarily covered agricultural products and automobiles.

The Morgan Stanley analysts also pointed out in the report that semiconductors are components of products sold elsewhere, so negative impact from the high revenue exposure to China “is not as meaningful” as it might be in other industries.

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