How Bad Is the China Slowdown? U.S. Companies -2-

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02/11/2019 | 07:27 pm


Chinese manufacturers are cutting back orders of microchips to avoid being left with unsold goods, in case the U.S.-China trade dispute yields higher tariffs, and demand for Chinese-made goods falters.



"They're risk averse. They're not going to take any chances. They're not going to hold inventory," Thad Trent, the financial chief at Cypress Semiconductor Corp., said Jan. 16 at a conference. "We see customers waiting at the last minute to place orders."



Chip makers link China's slowing growth with the U.S.-China trade fight. "Trade is the problem why Chinese economy is weakening so much," said Steve Sanghi, CEO of Microchip Technology Inc., which makes microcontrollers used in electronic and industrial components.



Some executives and analysts have said economic softness would dissipate if the trade issues were resolved. Others aren't so sure.



"There are some underlying economic and end-demand issues in China that still need to be dealt with and resolved," said John Vinh, a semiconductors analyst with KeyBanc Capital Markets Inc. "There is not potentially a quick fix as easy as resolving the tariff conflict."



Write to Austen Hufford at austen.hufford@wsj.com and Theo Francis at theo.francis@wsj.com





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