IQE share price drops 26% after noting Huawei ban will hurt profits

IQE share price has plummeted after worse-than-expected 2019 revenue guidance. The semiconductor wafer maker warned that the US ban on conducting business with Chinese electronics company Huawei will have a distressing impact on the global semiconductor industry.

Huawei ban has global effect on semiconductor industry

Huawei has been placed on a US trade blacklist for allegedly posing a security risk to the US government. As a result, many chipmakers that conduct business with the electronics giant like Broadcom say that the ban will negatively impact their revenue.

IQE is also feeling the effects of the prohibition on conducting business with Huawei. IQE supplies wafers to chip companies, including some that also supply chips to Huawei.

Dr. Drew Nelson, chief executive officer (CEO) of IQE, noted that because of ‘unprecedented times for the global semiconductor industry,’ the corporation expects full-year 2019 revenue to be between £140 million-£160 million. That falls below analysts’ expectations of £175 million.

Nelson spoke about how the Huawei ban will have a wide-ranging effect on semiconductor supply chains.

‘It is now clear that the impact of Huawei’s addition to the US Bureau of Industry and Security’s Entity List is having far-reaching and long-lasting impacts on global supply chains,’ said Nelson.

Can IQE share price survive the Huawei ban?

IG analyst, Jeremy Naylor, noted that IQE has diverse business interests besides semiconductor wafers like lasers and infrared technology. Despite the reduced 2019 forecast, Nelson said that IQE will make adjustments to increase its profits after the Huawei ban.

‘This is a matter outside of IQE’s control but we have responded swiftly to leverage our breadth of relationships and to pursue new sales opportunities. We are also taking prudent expenditure actions in order to manage through this period of uncertainty,’ said Nelson.

‘We anticipate significant new customer qualifications during the second half of 2019 as a result. As global markets adjust and recover, we remain extremely well placed for significant future growth,’ added Nelson.