NVTS - Wolfspeed Qorvo most at risk from Chinese export controls: Wells Fargo

2023-07-05 09:06:02 ET

A number of semiconductor companies are at risk after China decided to impose new export controls on gallium and germanium, two rare elements used to make semiconductors, investment firm Wells Fargo said, including Wolfspeed ( NYSE: WOLF ) and Qorvo ( NASDAQ: QRVO ).

Analyst Gary Mobley, who has an overweight rating on Wolfspeed ( WOLF ), said the North Carolina-based chipmaker could see constraints for gallium nitride, or GaN, on silicon carbide production.

Mobley added that Wolfspeed ( WOLF ) is the number one supplier of materials for gallium nitride, with companies like Qorvo ( QRVO ), NXP Semiconductors ( NXPI ) and others buying it from suppliers like Wolfspeed.

Wolfspeed ( WOLF ) shares were up more than 17% in pre-market trading on Wednesday.

Conversely, companies like Qorvo ( QRVO ), Skyworks Solutions ( SWKS ) and Qualcomm ( QCOM ), all of which are in the RF Front-end market, could also be impacted.

On Monday, China responded to recent chip export restrictions with its own set of export controls on some gallium and germanium products.

The Ministry of Commerce said the export curbs, which are aimed to "safeguard national security and interests," will be effective from August 1. Companies that do not apply for export licenses for the products listed will be held criminally responsible.

Mobley added that the gallium curb could impact Qorvo ( QRVO ), as it not only develops gallium nitride RF products, but it also specializes in gallium combined with arsenide-based products for RF applications.

Gallium combined with arsenide is used in chips for mobile communications, including in areas such as military or aerospace, as well as solar and photonics applications.

When germanium is combined with silicon, it creates processors used in RF-front end areas for smartphones, areas where Qorvo ( QRVO ), Skyworks Solutions ( SWKS ), Qualcomm ( QCOM ) and Broadcom ( AVGO ) operate.

Mobley also noted that Microchip Technology ( MCHP ) and NXP Semiconductors ( NXPI ) could see an impact from the export controls, though they have a small percentage of their respective revenues coming from semiconductor products that utilize some blend of gallium and germanium.

Additionally on Wednesday, Navitas Semiconductor ( NVTS ) said that it also has direct exposure to China's gallium curbs.

More on the chip war between the U.S. and China

• Chip war heats up as U.S. mulls new curbs on exports to China
• Double whammy: Dutch curb chipmaking gear sales to China
• Nvidia: Potential AI Chip Rules May Impact Investment Case

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