Broadcom CEO Hock Tan is paying the price for misjudging President Donald Trump’s resolve to “bring the Chinese to their knees,” CNBC’s Jim Cramer said Friday.
Trump feels he has to “sacrifice Broadcom on the alter of Huawei” to humble China in trade negotiations, Cramer argued. Last year, Broadcom received about $900 million in revenue from China-based Huawei, a major maker of smartphones and mobile networking gear.
“The president regards Huawei as the Achilles’ heel” of Chinese leader Xi Jinping. The calculation in effectively blacklisting Huawei from doing business with American companies is that China would never let one of its crown jewels of technology fail, the “Mad Money” host speculated.
Tan may be feeling hard done by Trump, said Cramer, pointing out that the Broadcom CEO in 2017 went to the White House, and joined the president, to announce he was relocating the Singapore-based company back to the United States.
In another knock, the Trump administration last year blocked Broadcom’s $117 billion bid to buy San Diego-based Qualcomm on national security grounds.
“What a kiss of death, if you’re a great friend with the president,” Cramer said on “Squawk on the Street. ”
“Broadcom is a remarkably good company and it’s going to be hurt” in the crossfire between the world’s two biggest economic superpowers, he explained.
Shares of Broadcom fell sharply at Friday’s open on Wall Street, after the semiconductor maker reported late Thursday weaker-than-expected quarterly revenue. It also announced a 2019 revenue forecast cut, predicting a slowdown in demand stemming from the conflicts between Washington and Beijing. This is being “driven by continued geopolitical uncertainties,” Tan said in a statement.
The company is also seeing the “effects of export restrictions on one of our largest customers,” Tan added, in a reference to the Trump administration last month barring Huawei, without special permission, from buying equipment from U.S. companies. However, the Commerce Department did put a 90-day hold on the move.
The White House has accused Huawei of being too closely tied to China’s communist government and expressed concern about Huawei technology being used for spying against the U.S. For its part, Huawei has repeatedly asserted that it is independent from the Chinese government.
A spokesperson for the White House was not immediately available to respond to CNBC’s request for comment on Cramer’s remarks.