The Trump administration’s proposed Trade Act Section 301 tariffs on Chinese goods imported to the U.S. under the Harmonized Tariff Schedule’s 8517.62.00 subheading targets equipment “critical for the build-out of high-speed broadband internet” and related IoT technologies, said the Telecommunications Industry Association in comments posted Saturday in docket USTR-2018-0026. The comments were filed July 27, when 10 percent tariffs were still on the table, days before U.S. Trade Representative Robert Lighthizer announced he will “consider” hiking the duties to 25 percent (see 1808010018).
Strategies for reducing exposure to U.S. tariffs on Chinese imports (see 1808030028) were discussed on Universal Electronics and GoPro Q2 earnings calls Thursday. Universal is developing plans to "mitigate" such costs by "gradually" shifting production of its "highest-priority or highest-volume" goods "out of China and into existing facilities that we have in Mexico or Brazil,” said CEO Paul Arling. The “vast majority” of Universal’s remote controls are manufactured in its Chinese factories, Arling testified against the tariffs at a July 24 Office of U.S. Trade Representative hearing. Shifting production “will take months to complete, which means that we may incur additional costs during the transition as we expect some of these additional tariffs to be implemented somewhere in late September or probably into October,” said Arling now. GoPro has escaped the tariffs, said CEO Nicholas Woodman. If that changes, Woodman thinks GoPro would be able to shift production easily to “two locations” without tariff exposure. Friday, GoPro closed up 18 percent at $7.05 and Universal gained 26 percent to end the day at $44.95.
FCC “skepticism” about Dish Network’s ability to “execute” on its narrowband IoT buildout strategy by the March 2020 deadline possibly may have been one of the “motivations” behind the letter Wireless Bureau Chief Donald Stockdale sent the company last month seeking details about its network deployment plans (see 1807100062), said Chairman Charlie Ergen on a Friday earnings call. Though it was “unusual to receive a letter,” it’s always "an opportunity for us to continue dialogue with the regulators, and we always want to take advantage," he said.
Fitbit continues to worry about tariffs, its finance chief said shortly after the Trump administration said it might impose 25 percent (up from 10 percent) tariffs on $200 billion of Chinese products over intellectual property disagreements (see 1808010078). The company is “navigating a number of different paths” to reduce or eliminate such exposure, said Chief Financial Officer Ron Kisling on a Wednesday evening earnings call. Fitbit uses Chinese contract manufacturers to produce its devices, and tariffs would increase the bill of materials costs of goods it imports to the U.S., said Kisling. There’s no certainty whether the tariffs “will ultimately go into effect,” or if wearable devices can qualify for tariff “exemptions,” or “how much, if any, of the potential increase in cost can be mitigated,” said Kisling. The full-year forecast “excludes the potential impact,” he said. “We support open markets and free trade where everyone plays by the rules.” One proposed tariff line “covers a wide variety of wireless products, including fitness trackers and smartwatches, which comprise nearly all of Fitbit's products,” said the company in comments July 27 asking to testify against the duties. Also, following Q2 results, the company's stock closed down 7.9 percent Thursday at $5.45.
Though Tesla didn’t keep the promise CEO Elon Musk made a year ago to complete its first “coast-to-coast” autonomous drive using Autopilot last year (see 1708030018), the automaker has that capability for demonstrations, he said on a Wednesday evening earnings call. If Tesla were to “pick a specific route and then write code to really make that route work, we could do a coast-to-coast route drive, but that would be kind of gaming the system,” said Musk. He doesn’t want to take the team away from building on the “fundamental safety of the existing features.” It's teaching Autopilot to “do things like recognize traffic lights and stop signs and make hard right turns and that kind of thing, but it's not at the safety level that's considered OK for release,” he said. After quarterly results, the stock Thursday closed up 16 percent at $349.54.
Few companies are more “uniquely positioned” than CBS “to profit from the explosion of premium content” on over-the-top and direct-to-consumer services, said CEO Leslie Moonves on a Thursday afternoon earnings call. The call was his first since the CBS board voted the previous day to hire outside counsel to investigate allegations of sexual misconduct against Moonves (see the personals section of this publication). Adam Townsend, executive vice president-corporate finance, at the top of the call put off limits any discussion or Q&A about the allegations or investigation. “In light of any litigation and other matters, and on the advice of counsel,” said Townsend, “the scope of today’s call and any questions will be limited to the quarterly results of the company.” OTT services “are becoming mainstream,” and CBS has its “own, well-established platforms growing right along with consumer demand,” said Moonves. The network’s previous goal was by 2020 to have 8 million subscribers combined for its two “cornerstone” services, CBS All Access and Showtime OTT, he said. CBS is now on pace to reach that milestone in 2019, so the network is upping its forecast to 16 million subscribers by 2022, he said. “In other words, we plan to double our original goal in just two additional years, and that doesn’t even include the subs we’re just beginning to get internationally.”
Critics are mobilizing opposition to the Trump administration’s third round of proposed tariffs on Chinese imports, which also drew Apple and other tech concern this week (see 1808010069). More than 300 people in various industries filed requests in docket USTR-2018-0026 by the Friday deadline to appear at Office of the U.S. Trade Representative hearings, virtually all to testify against the tariffs. USTR didn’t comment.
The U.S. trade relationship with China "significantly impacts” CTA members relying "on the global supply chain,” said Sage Chandler, vice president-international trade. She asked to appear at Aug. 20-23 hearings to oppose 10 percent Trade Act Section 301 tariffs proposed by the Office of the U.S. Trade Representative. Members identified 302 tariff lines of Chinese imports in USTR sights, with more than $109 billion in value, for which 10 percent duties “would be detrimental,” said Chandler's Friday filing. Harmonized Tariff Schedule codes that most worry members would affect startups using U.S. IP, research, design and engineering, said Chandler. Duties on those products would cause “substantial” harm to the entire IoT “ecosystem,” she said. What spooks Chandler most is a “single line item,” HTS 8517.62.00, listed as covering machines for reception, conversion and transmission or regeneration of voice, images or other data, she told us Monday. That “captures servers, gateways, modems,” plus “Bluetooth-enabled devices, like headsets, speakers, fitness trackers, smart health devices and watches,” she said. It exposes “basically the entire ecosystem of the internet,” she said. “You’re looking at what potentially could be pass-down costs everywhere along the chain for the Internet of Things."
That Intel celebrated its 50th birthday July 18 is “a big deal in an industry that never stops evolving,” said Robert Swan, chief financial officer and interim CEO, on a Thursday earnings call, the first since Brian Krzanich resigned as CEO last month for violating a “non-fraternization” policy (see 1806210008). Under Krzanich’s watch, Intel “set a course five years ago to transform the company” from a PC-centric microprocessor supplier to a data-centric industry leader, said Swan. “We made investments to enhance and extend our core microprocessor business along with a series of bold bets to compete and win in new markets. Our thesis was that Intel is uniquely positioned to capitalize on the world's insatiable need to process, store and move data.” The results have been a “dramatic” success, said Swan, who publicly thanked Krzanich, because “the investments he made set us on a course for transformation.” Intel's board is “making good progress” in finding Krzanich’s successor, said Swan. “While there is no timetable, the board is working with a sense of urgency, and the identification of candidates, both internal and external, is well underway.” Shares closed 8.6 percent lower Friday at $47.68on investors' fears that Advanced Micro Devices was eating into Intel's leadership share in the lucrative data-center business, despite generally positive Q2 results in that sector for Intel. Revenue in Intel's cloud business, its largest data center segment, grew 41 percent year over year in Q2, as "hyperscale" capital expenditures expanded "to handle the explosive need to transmit, store and analyze data," said Swan on the call.
It’s an “understatement to say” NXP Semiconductors is “disappointed in the outcome of the regulatory approval process in China” that doomed Qualcomm’s $44 million NXP buy (see 1807250062), said NXP CEO Rick Clemmer on a Thursday earnings call. The combined Qualcomm/NXP would have “represented the true semiconductor industry powerhouse,” he said. NXP’s mission now is not to “dwell on what could have been” but to “focus on what we can do to accelerate and expand our leadership,” said Clemmer. Amid questions about “the level of commitment of the NXP executive management team” now that the Qualcomm deal died 21 months after its inception, “the management team, including Peter and myself, are fully committed to continue to drive the future success of NXP,” said Clemmer, referring to Chief Financial Officer Peter Kelly. NXP took an estimated $31 million hit in Q2 from the Commerce Department’s ban on materials shipments to ZTE that caused disruptions to NXP’s RF power components business “and to a lesser degree our digital networking and other businesses,” said Clemmer. Shipments to ZTE have resumed and will “hopefully continue” as normal for the rest of the year, said Kelly. Clemmer suggested Chinese regulatory authorities refused to approve the Qualcomm buy in retaliation for the ZTE ban because it “was considered to be one of the factors in the discussions with the Chinese relative to the regulatory approval process.” Clemmer finds it quite surprising “that the Chinese made the decision they did, not to actually approve the transaction, given that ZTE was brought back to life” by the Trump administration and Congress, he said. Representatives of China’s Foreign Ministry didn’t comment Friday, nor did Qualcomm, which Thursday blamed the NXP deal's demise on the "geopolitical environment" (see 1807260005).