Broadcom Shares Slide Amid U.S. Sanctions on Chinese Semiconductor Industry

In recent developments, Broadcom (NASDAQ: AVGO) has faced challenging market circumstances following the U.S. government's tightening restrictions on the Chinese semiconductor industry. This regulatory environment has significantly impacted Broadcom's collaborative efforts with ByteDance, the parent company of TikTok. Notably, a planned project for designing a new 5-nanometer AI accelerator has been canceled.

Insiders have revealed that U.S. restrictions on semiconductors have increasingly categorized chips designed with high bandwidth memory (HBM) as AI-related, thereby subjecting them to stricter controls. This categorization has resulted in reduced orders from Chinese companies for Broadcom’s advanced packaging technology, CoWoS. Several Chinese clients, including Pingtouge, have significantly cut their orders, and Sanechip has halted shipments post-2025 Q1 completion.

The collaboration between ByteDance and Broadcom began a few years ago with Broadcom supplying high-performance semiconductor switches. In an ambitious move last June, the two companies sought to develop a 5nm AI accelerator ASIC, but this was stymied by U.S.-imposed semiconductor restrictions.

Broadcom's core ASIC customers have been Google, Amazon Web Services (AWS), and ByteDance, contributing about $20 billion collectively. The company had anticipated a market opportunity for ASICs of $60 billion to $90 billion by 2027. However, the TikTok ban has posed potential revenue losses of $2 billion to $3 billion, affecting not only Broadcom but also its supply chain partners like SK Hynix, which was in talks to supply HBM units monthly.

With the U.S. Department of Commerce announcing new export controls targeting the Chinese semiconductor industry, extensive measures are being taken to prevent China from acquiring advanced chips. These developments have led some companies, including Broadcom, to reevaluate their market strategies and align them with current geopolitical landscapes.

Despite these challenges, Broadcom remains poised to capitalize on AI-driven growth opportunities. The company has demonstrated significant growth in AI-related revenues, forming a considerable part of its semiconductor business. With a focus on optimizing financial instruments and strategy, Broadcom is likely to find pathways to mitigate the impact of these global trade tensions.