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Xilinx resumed sales of some components to Huawei, but Huawei’s lower forecast led to a decline in stock prices.

(Reuters) - Xilinx Corporation (XLNX.O) said it has resumed partial sales of components to Huawei Technologies Co., Ltd., but expects its quarterly revenue to be lower than Wall Street's expected Wednesday, citing US restrictions on selling products to China Telecom.

FILE PHOTO: A chip of Xilinx is displayed through a magnifying glass during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai, China November 6, 2018. REUTERS/Aly Song

The forecast and sent the chipmaker’s shares down 5.78% to $125.50 in extended trading. Xilinx makes programmable chips that are used in data centers to speed up tasks like artificial intelligence work, as well as chips that are used in 5G telecommunications base stations.

Company executives did not disclose how much revenue the Xilinx derives from Huawei, but said no single customer accounted for more than 10% of its revenue and that Xilinx has cut its sales expectations for Huawei by more than half.

CEO Victor Peng said that Xilinx stopped all sales to Huawei in May when US restrictions took effect. Peng said that during the fiscal first-quarter ended June 29, Xilinx determined that some of its products, such as its older, 28-nanometer chips And some chips not designed for 5G gear, could legally could be sold to Huawei.

Xilinx resumed shipping those chips and has also applied for licenses with the U.S. Commerce Department to resume selling other products.

On a conference call, analysts pressed the company on whether Huawei might speed the transition to fully custom chips made by its HiSilicon unit to replace Xilinx’s chips. Peng told analysts he did not think that would happen quickly.

“They’re certainly not going to give up on 5G,” Peng said. “They’ve architected it in certain ways. That’s not something that anybody could just change on a dime.”

The company said it expects second-quarter revenue of between $800 million and $850 million, below analysts’ average estimate of $852.5 million, according to IBES data from Refinitiv.

Peng told analysts that the company continues to ship chips to other companies building out networks for 5G, the next generation of wireless data communications, including ZTE Corp (000063.SZ), which had previously been the target of U.S. restrictions but has since had them removed.

Other chipmakers, such as Broadcom Inc (AVGO.O), have said they expect other electronics makers to step in and eventually fill in lost Huawei sales, but Peng told Reuters that is less likely to happen in the market for 5G gear.

Our review:

In fact, we know that the domestic communication infrastructure is different from  foreign countries'. Although the telecommunications industry has maintained steady development over the past few years, the speed of network speed and universal service have been significant, mobile data traffic continues to grow at a high speed, and network infrastructure capabilities continue to increase. The characteristics of upgrading, etc., in recent years, China's infrastructure performance is eye-catching, which will bring huge benefits to the construction of 5G. Not only domestic Huawei 5G suppliers, ZTE, Ericsson abroad, Nokia also benefited.

We hope that Huawei and ZTE can seize the opportunity of this 5G revolutionary period, at all costs, without fear of any challenge, and strive to become a leader in the field of 5G!