Chips Are Down: Huawei U.S. Blacklisting Knocks EU Semiconductor Stocks

European chipmakers Infineon Technologies, AMS and STMicroelectronics fell sharply on Monday amid worries the Huawei Technologies suppliers may suspend shipments to the Chinese firm due to a U.S. crackdown.

STMicro was down 4% at the bottom of Paris’ CAC 40, while Infineon fell 3.4% to the bottom of Frankfurt’s DAX 30 and AMS was down 4.6% at 0836 GMT.

The selling came after Nikkei Asian Review reported that Infineon had halted shipments to Huawei after Washington added the world’s No. 2 smartphone maker to a trade blacklist last week, imposing restrictions that will make it difficult to do business with U.S. companies.

The report also said STMicro was set to have meetings this week to discuss whether to continue shipping to Huawei.

Germany’s Infineon and France’s STMicro, Europe’s biggest chipmakers, had no immediate comment.

Even if companies can continue to sell components without being subject to U.S. restrictions, any disruption to Huawei’s operations will have a knock-on effect on its suppliers, said Liberum analyst Janardan Menon.

“In coming months it can broadly be assumed that the Huawei portion of their (European chip suppliers’) business will see quite a bit of weakness, if the U.S. government does not change its mind,” he said.

The impact will not be uniform because the companies have different levels of exposure.

The selling was particularly amplified as investors exited bullish positions built up in the trade-sensitive sector in recent months as worries about the U.S.-China trade spat eased and companies forecast a recovery in smartphone demand in the second half of the year.

“With all of the semis commentary geared into a second-half recovery, a sizeable customer having supply issues could push that guidance out,” said a trader.

AMS has almost doubled in value this year, while STM has rise almost 20%, outperforming the pan-European STOXX 600 index.―New York Times