The top stories here for the day are Apple’s (AAPL - Free Report) guidance cut, Qualcomm (QCOM - Free Report) choosing Samsung to make its 5G chips, U.S. considering further restrictions on Huawei and Amazon’s (AMZN - Free Report) climate fund. Here are the details:
Apple Cuts Guidance
Apple confirmed what many analysts expected, that the coronavirus that hit China’s Hubei province would lead to weaker iPhone sales in the current quarter. But while analysts weren’t sure whether sales would come within its very wide guidance range, Apple now says that it won’t make those numbers. Moreover, disruptions in the supply chain can have a far-reaching impact on iPhone sales in other markets as well.
The problem is that most of its 40+ stores either remain closed or are not open long enough to generate required sales while manufacturing operations continue to operate at sub optimal capacity with only a small fraction of workers.
Analysts had earlier said that iPhone demand shouldn’t dissipate but is more likely to get pushed out into later quarters. And since the virus affected the first quarter, there’s a chance that full-year results will remain unaffected. But, of course, that will depend on the extent of the supply chain bottlenecks, especially given that it is just getting ready to ship its new cheaper iPhone in March.
Samsung Wins Qualcomm Deal
Samsung will make new Qualcomm X60 5G chips on its 5nm process and may also supply modem chips on the same process, according to media reports. Qualcomm estimates that 175 million to 225 million 5G smartphones will be sold in 2020. Its X60 chips will aggregate signals sent over disparate frequencies in different 5G networks, thus speeding up downloads.
Samsung, traditionally a memory chip maker, announced a plan last year to invest $116 billion in non-memory chips through 2030. So this deal may be evidence of the progress it’s making.
It may also help the company take share from market leader Taiwan Semiconductor (TSM - Free Report) . TSM is the market leader by far (Trendforce estimates Samsung had 17.8% market share in Q4 versus TSM's 52.7%), so there’s no risk to its throne at this point. But memory prices tend to be volatile (although suppliers do try to lock some big customers into long-term contracts), which is the real reason this deal is such good news for the Korean company.
Huawei Restrictions Good for the Market
The U.S. is determined to contain Huawei’s progress. The Trump administration is considering an amendment to the Foreign Direct Product Rule, which requires some foreign manufacturers of U.S. technology to U.S. regulations and could prevent companies like Taiwan Semiconductor from selling Huawei its chips.
The company has repeatedly denied allegations that its equipment helps the Chinese government to spy on a country’s networks. But a growing uneasiness about China’s dominance and potential for espionage led the U.S. imposed restrictions anyway and the UK followed with some of its own.
Other European countries are also concerned about the issue, particularly because the cost of switching from legacy Huawei equipment would run into billions, and also because it would considerably delay 5G deployment. Telecom industry leaders are therefore developing an open standard that would help industry players seamlessly deploy components from competing suppliers.
This will not only mean the end of dominance for foreign players like Huawei but also increased competition for the EU’s Nokia and Ericsson. So it will be positive for the market overall and longer term, also fro telecoms.
Amazon’s Bezos Forms New Climate Fund
Bezos, the world's richest man, with a net worth of $130 billion dollars, pledged $10 billion dollars to create an Earth Fund on Monday, Feb 17. The fund will support scientists, activists and nonprofits fighting the effects of climate change. It will start disbursing grants from as early as this summer. He is also investing $100 million in reforestation efforts. Earlier, in Sep 2019, Amazon announced that it would buy 100,000 Rivian EVs.
Amazon earlier stated that its goal is to be net carbon neutral by 2040, 10 years ahead of the Paris climate accord’s schedule. While this may be challenging to say the least considering that it already delivers some 10 billion items a year, activists both within the company and outside have said that it could do more.
Just last month, Amazon Employees for Climate Action (AECA) went against the company’s communications policy to protest its environmental policies. They went ahead and posted a letter on Medium, asking Bezos and the board of directors to bring a shareholder resolution for a comprehensive climate plan that would be based on their suggestions.
Now, while lauding this move, the group is pushing against Amazon’s other activities that contribute to climate change, such as the consumption of fossil fuels: "We applaud Jeff Bezos' philanthropy, but one hand cannot give what the other is taking away," it tweeted.
"Climate change is the biggest threat to our planet," Bezos said in an Instagram post. "I want to work alongside others both to amplify known ways and to explore new ways of fighting the devastating impact of climate change on this planet we all share." "It's going to take collective action from big companies, small companies, nation states, global organizations, and individuals," Bezos said.
In 2018, Amazon’s carbon footprint was reportedly 44.0 million metric tons (MMT).
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