Big American Companies Wonder: When Will China Bounce Back?

Qualcomm President and CEO Cristiano Amon attends the China Development Forum 2023 in Beijing, China, on March 25, 2023. REUTERS/Thomas Peter (REUTERS)
Qualcomm President and CEO Cristiano Amon attends the China Development Forum 2023 in Beijing, China, on March 25, 2023. REUTERS/Thomas Peter (REUTERS)


  • Economy’s anemic postpandemic recovery disappoints many U.S. companies, which see a slow return

HONG KONG—Big American companies in China were counting on a postpandemic boom to boost global revenue. For many, it isn’t happening.

From chip maker Qualcomm to industrial bellwethers Caterpillar and DuPont, companies are reporting weak results out of China as the country’s reopening from three years of Covid-related isolation has failed to gain steam.

While some retailers are seeing benefits from the reopening, other firms have said they are expecting the weakness to continue through this year and have cut company outlooks based on the slow recovery.

“I think the overall expectation is, following the reopening, the China market was going to bounce back," Qualcomm Chief Executive Cristiano Amon told investors last month. “We have not seen those signs yet."

The company said it expects global sales of smartphones—a huge share of which are powered by Qualcomm chips—to fall this year by a bigger margin than initially expected, in part because of the persistent economic slowdown in China, the world’s largest market for these products. Qualcomm books more than half its yearly revenue in China, where many customers assemble its chips into finished electronics.

Economists have been cutting their growth forecasts for China in recent weeks after a spate of disappointing measures of the country’s economy, showing contracting factory activity, tepid consumer spending, a short-lived recovery in home sales and record-high youth unemployment.

The slowdown is hitting companies’ bottom lines. Many executives have pointed to weakness in China that has persisted for months after the Lunar New Year holiday in late January, which was meant to herald a boom in new activity following the end of Covid-19 restrictions. So far, the boom hasn’t materialized.

“China is our weakest geography," said Eric Bjornholt, chief financial officer at chip maker Microchip Technology, on Wednesday. “We really haven’t seen any sort of significant bounce back since Lunar New Year."

The disappointing results are the latest challenge facing big companies with fortunes tied to China. Deteriorating U.S.-China relations and an increasingly tight web of American sanctions on the country have added to the challenges facing multinationals.

China, too, is stepping up actions against American companies. Last month, it banned major Chinese firms from buying from memory-chip company Micron Technology, a move widely seen as a response to new controls on U.S. chip exports last year. It has also launched a crackdown on consulting and due-diligence firms that work with Western companies.

Companies with big Chinese footprints, such as Apple, have been exploring ways to scale back their reliance on China. Apple sales were down more than 5% in China, Hong Kong and Taiwan during the first half of the company’s current fiscal year. They rose 8.5% in its 2022 year.

Still, not all companies are downbeat. Consumer-facing companies in particular are reporting a rebound in China from last year’s depressed pandemic-era levels following an early burst of spending from long-confined shoppers.

Luxury conglomerate LVMH, for example, reported a rebound in China sales, while Walmart said its sales there jumped 28% in its most recent quarter, citing strong results during Lunar New Year. Costco Wholesale is opening another three stores in China this year, an expansion that doubles its store count since December, finance chief Richard Galanti said last month. Existing stores there are “doing great. End of story," he said.

But the consumer binge lags behind what was experienced by other economies after their post-Covid reopenings. At Starbucks, which is opening nearly 3,000 new stores in China over the next two years, same-store sales in the country rose 3% in the most recent quarter, after tumbling 20% in the same period a year earlier from 2021. The coffee chain said this year’s result still exceeded expectations.

“While we don’t expect a straight-line recovery, we are confident in our long-term opportunity," Starbucks CEO Laxman Narasimhan said.

Results of other companies tied to segments of China’s broader economy, such as the property and automotive markets, are signaling trouble.

In February, DuPont finance chief Lori Koch told investors that “we’re still very bullish overall on China." But in its first-quarter earnings report last month, the company said sales in China fell by nearly 20%, driven by a weak electronics market.

At Caterpillar, revenue from China typically accounts for between 5% and 10% of its total, CEO James Umpleby told investors in April. This year, the company expects China sales to come in below that range, he said.

One reason: Weak construction activity in China is leading to a drop in demand this year for the company’s excavators. He said the slowdown has freed up its excavators for other markets. It coincides with the downturn in China’s property market, following years of being a growth driver.

Companies tied to China’s giant vehicle market are experiencing disappointment as the booming electric-car sector shows signs of slowing and subsidies come to an end. Electric-vehicle sales rose 23% in China in the first quarter, after more than doubling a year earlier.

Nvidia finance chief Colette Kress recently told investors that revenue growth at the chip company’s automotive business slowed in the first quarter compared with the fourth, because of slower-than-expected demand from Chinese EV companies.

“We expect this dynamic to linger for the rest of the calendar year," she said.

Auto-parts supplier BorgWarner last month cut its revenue expectations from China for the year because of weaker-than-anticipated auto production out of the country during the first quarter. Chief Financial Officer Kevin Nowlan told investors that China revenue could fall by up to 3% during the year.

“China, we knew was going to have a softer Q1," Mr. Nowlan said. “I think it came in maybe even a little softer than we expected."

Write to Dan Strumpf at

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