(Reuters) – Xilinx Inc (XLNX.O) said it had resumed some sales to Huawei Technologies Co Ltd but forecast current-quarter revenue below Wall Street estimates on Wednesday, citing the impact of U.S. restrictions on selling to the Chinese telecommunications firm.
FILE PHOTO: A chip of Xilinx is displayed through a magnifying glass during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai, China November 6, 2018. REUTERS/Aly Song
The forecast and sent the chipmaker’s shares down 5.78% to $125.50 in extended trading. Xilinx makes programmable chips that are used in data centers to speed up tasks like artificial intelligence work, as well as chips that are used in 5G telecommunications base stations.
Company executives did not disclose how much revenue the Xilinx derives from Huawei, but said no single customer accounted for more than 10% of its revenue and that Xilinx has cut its sales expectations for Huawei by more than half.
Chief Executive Victor Peng said that Xilinx stopped all sales to Huawei in May when U.S. restrictions took effect. Peng said that during the fiscal first-quarter ended June 29, Xilinx determined that some of its products, such as its older, 28-nanometer chips and some chips not designed for 5G gear, could legally could be sold to Huawei.
Xilinx resumed shipping those chips and has also applied for licenses with the U.S. Commerce Department to resume selling other products to Huawei.
On a conference call, analysts pressed the company on whether Huawei might speed the transition to fully custom chips made by its HiSilicon unit to replace Xilinx’s chips. Peng told analysts he did not think that would happen quickly.
“They’re certainly not going to give up on 5G,” Peng said. “They’ve architected it in certain ways. That’s not something that anybody could just change on a dime.”
The company said it expects second-quarter revenue of between $800 million and $850 million, below analysts’ average estimate of $852.5 million, according to IBES data from Refinitiv.
Peng told analysts that the company continues to ship chips to other companies building out networks for 5G, the next generation of wireless data communications, including ZTE Corp (000063.SZ), which had previously been the target of U.S. restrictions but has since had them removed.
Other chipmakers, such as Broadcom Inc (AVGO.O), have said they expect other electronics makers to step in and eventually fill in lost Huawei sales, but Peng told Reuters that is less likely to happen in the market for 5G gear.
“Infrastructure is just different. There’s not as many people who can do it,” Peng told Reuters in an interview. “It’s a well-known fact that the Chinese operators have favored the domestic suppliers” such as Huawei and ZTE, among others.
Flores said that the company was “not reiterating or updating our full-year guidance” for the full fiscal 2020 year and that its outlook was “somewhat moderated by trade-related concerns.” In May, the company said it expected between $3.45 billion and $3.6 billion in revenue. Xilinx it will give more details on its full-year forecast in October.
Reporting by Munsif Vengattil in Bengaluru and Stephen Nellis in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker