Street Sees Worrisome Omen for Broadcomm, Qualcomm in Amkor Troubles

Amkor Technology (AMKR), a provider of semiconductor packaging and test services, disclosed in an SEC filing today that it has “experienced system disruptions resulting in delayed shipments to certain customers” in connection with the implementation of a new enterprise resource planning system as its facility in the Philippines. The company said it is too soon to tell what the financial impact of those delays will be on the company.

In a research note, Citigroup’s Timothy Arcuri described the disclosure as “pre-announcing the pre-announcement,” asserting that in addition to the ERP problem, “weakening demand plays a large part” in the current issues at the company. Arcuri says that chip inventory build has been pulled forward “due to weaker demand rather than too much supply.”

Arcuri notes that his colleague Andrew Lu overnight downgraded his rating on Taiwan-based Kinsus Interconnect Technology to Sell from Buy, “citing significant pushouts and cancellations from key customers in the communications and consumer vertical.” He says those customers include Broadcom (BRCM) and Qualcomm (QCOM), among others.

We note that AMKR is the most heavily exposed OSAT [outsourced semiconductor assembly and test] vendor to communications and consumer end markets and its BRCM and QCOM exposure are high.

That all has obvious negative implications for both Broadcom and Qualcomm, and both stocks are lower today. In today’s trading: Amkor closed down $1.03, or 8.4%, to $11.28. Broadcom was down $1.55, or 5.6%, to $26.23. Qualcomm closed down $1.29, or 2.7%, to $46.06.