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Jun 4, 2020

Broadcom warns of weak demand for smartphone components

Signage is displayed outside of Broadcom Ltd. headquarters in Irvine, California, U.S., on Monday, Nov. 6, 2017. Broadcom Ltd. and its advisers are gearing up for a proxy battle, making an appeal directly to shareholders, should Qualcomm Inc. reject its $105 billion takeover offer, according to a person with knowledge of the matter. Photographer: Patrick T. Fallon/Bloomberg

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Broadcom Inc., a chipmaker that supplies Apple Inc. and other large electronics makers, gave a lackluster forecast, as weak demand for smartphone parts overshadows rising orders from data center owners.Revenue in the three months ended in July will be US$5.75 billion, plus or minus US$150 million. That compares with an average analyst prediction of US$5.77 billion, according to data compiled earlier on Thursday by Bloomberg.

The San Jose, California-based company makes chips that filter radio signals in iPhones and other smartphones. With much of the world’s population confined to their homes, handset demand has dropped. Broadcom is also a key supplier of switch chips, the complex semiconductors that manage data traffic in networking equipment.Read more: Smartphone Shipments Projected to Fall a Record 12 per cent in 2020

“Looking ahead, our third quarter guidance for semiconductors reflects a surge in demand from cloud, telecom and enterprise customers, offset by supply chain constraints and an expected substantial reset in wireless,” Chief Executive Officer Hock Tan said in a statement.

Three months ago, the company withdrew its annual sales forecast and gave weak near-term guidance, citing the coronavirus pandemic. Tan said in March that Broadcom’s supply chain hadn’t been hurt by the lockdown. Then in April, the company told customers to place orders at least six months ahead of time because of shelter-in-place rules in Malaysia, Thailand, Singapore and the Philippines.

The company, one of the latest to report earnings in the tech sector, is giving an up-to-date view on demand as the economy crumbles in the midst of the pandemic. Broadcom’s stock dropped 1 per cent in extended trading. The shares closed at US$308.89 earlier in New York.

Broadcom, one of the world’s largest chipmakers, has branched out into mainframe computer and security software. Tan assembled the company in a string of acquisitions, giving its products a role in everything from powerful data center networking gear to smartphones.One bright spot for Broadcom has been the rush to spend on data center equipment by the large cloud-computing providers. They’ve splashed out on increasing their capacity to meet a flood of extra traffic caused by the boom in work from home.Net revenue in the fiscal second quarter rose 4 per cent to US$5.74 billion, the company said. Before certain items, profit was US$5.14 a share.