Shares in QUALCOMM Incorporated (NASDAQ: QCOM) fell sharply on Thursday amid mounting turmoil in China that has cast a shadow over the company’s sales prospects in a pivotal market.
Qualcomm faces multiple challenges right now. The first is related to Apple Inc.’s (NASDAQ: AAPL) iPhone, which is currently facing an expanding ban in China. This ban would prevent the iPhone from being used by government-backed agencies and state-run companies. It’s worth noting that Qualcomm is one of the major suppliers of the iPhone, specifically responsible for the product’s modem chip.
Furthermore, U.S. lawmakers are intensively scrutinizing suppliers that do business with Huawei Technologies Co., a controversial Chinese tech company. Some lawmakers are advocating for a complete halt to all U.S. exports to Huawei. San Diego-based Qualcomm supplies Huawei with older-generation 4G chips.
China, including Hong Kong, constitutes approximately two-thirds of Qualcomm’s revenue. Consequently, investors are closely monitoring the unfolding developments in this vital market. In response to the latest news, Qualcomm stock plummeted 7.22% to $106.40 on Thursday, echoing the decline in shares of other mobile phone suppliers.
The Huawei controversy involves China’s leading chip manufacturer, Semiconductor Manufacturing International Corp. (SMIC). It has come to light that SMIC may have violated U.S. sanctions by supplying advanced components to Huawei, a company according to U.S. lawmakers.
“It sure looks like it did violate sanctions,” remarked Representative Michael McCaul during a Wednesday briefing at the U.S. embassy in the Hague. He added, “SMIC continues to try to get our intellectual property.”
Huawei employs an advanced 7-nanometer processor from SMIC to power its latest smartphone, as indicated by a teardown commissioned by Bloomberg News. This suggests that China is making progress in producing cutting-edge semiconductors despite facing U.S. sanctions. This smartphone did not feature QUALCOMM Incorporated (NASDAQ: QCOM) components.
Mary Lee is a freelance writer and journalist based in Toronto, Canada. She holds an M.S. degree in business and economic journalism from Columbia University’s Graduate School of Journalism in New York and a certificate in digital marketing from the University of Toronto.
