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Xilinx Asks U.S. to Allow Broader Shipments to Huawei

Ian King

(Bloomberg) -- Xilinx Inc., a supplier of key components used in mobile phone networks, said its financial results were hurt by the U.S. government ban against China’s Huawei Technologies Co., and it has asked for permission to resume broader shipments to its Chinese customer.

Xilinx’s earnings report highlighted the difficulty U.S. chipmakers are facing as they try to navigate a trade dispute between the two countries. The comments by company executives were among the most detailed insights provided to date into an issue that’s causing uncertainty for the $470-billion chip industry. The U.S. is the biggest maker of the vital electronic components and China is the biggest buyer and consumer of them.

The San Jose, California-based chipmaker halted all sales to the Chinese company after it was blacklisted in mid-May by the U.S. government, Xilinx Chief Executive Officer Victor Peng said on a conference call. It resumed supply of some older parts, but isn’t providing its customer with components for fifth-generation, or 5G, cellular network equipment, he said.

“We determined that we could lawfully resume shipping select products,” Peng said. “What we’ve applied for is for some additional products but certainly not all of them.”

He cautioned that he can’t predict whether Xilinx will get a license to resume its business with Huawei at a higher level. Some areas are off limits because of security constraints and he can’t predict when his company might receive approval from the U.S. Department of Commerce. Typically, it takes 69 days to get a response from the government to such requests, but Peng said he hopes the discussion at a meeting among industry executives and administration officials at the White House earlier this week will lead to a faster process.

The Chinese telecommunications company accounts for as much as 8% of Xilinx’s revenue, according to an estimate by KeyBank Capital Markets. Even with orders disrupted to that customer, Xilinx reported that quarterly revenue grew 24% to $849.6 million from a year earlier.

“Considering that one of the leaders in wireless did get impacted, clearly then the macro picture is quite good,” Peng said in an interview.

Earlier, Xilinx projected revenue in the current period will be $800 million to $850 million, compared with the average analyst estimate of $853 million, compiled by Bloomberg. Gross margin, or the percentage of sales remaining after deducting the cost of production, will be 65% to 66%.

Xilinx, whose chips have mainly been used in mobile phone network equipment and for the design and testing of other types of chips, is seeking new markets under Peng. The company specializes in field programmable gate arrays that can have their function and capabilities changed via software, even after they’ve been installed in electronic devices.

The shares dropped about 6% in extended trading after the earnings announcement. The stock closed at $132.14 in New York and has gained 55% this year.

(Updates with comments from CEO throughout.)

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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