American chipmaker Micron Technology Inc. surprised analysts today after reporting third-quarter results that easily beat expectations.

The company’s earnings report comes as several media sources said it and other chipmakers have found ways to get around a U.S. government ban on sales to the Chinese telecommunications giant Huawei Technologies Co. Ltd., which is one of their biggest customers and a key source of revenue.

Micron, which saw its share price jump more than 8% in after-hours trading, reported earnings before certain costs such as stock compensation of $1.05 per share, above the analyst consensus of earnings of 79 cents a share. Revenue also came in higher, at $4.79 billion versus the $4.69 billion consensus, though that was down 39% from the same period one year ago.

The strong performance shows that Micron was able to keep ticking over despite there being no end in sight to the trade tensions between the U.S. and China. Huawei, which is the main focus of the trade war and has been barred from buying components and services from many U.S. technology companies, accounted for 13% of Micron’s revenue in the previous two quarters this year.

Analysts were therefore bracing themselves for bad news, but in a conference call, Micron Chief Executive Officer Sanjay Mehrotra (pictured) revealed the company had been able to continue selling some products to Huawei.

“To ensure compliance Micron immediately suspended shipments to Huawei and began a review of Micron products sold to Huawei to determine whether they are subject to the imposed restrictions,” Mehrotra on the call. “Through this review we determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions. We have started shipping some orders of those products to Huawei in the last two weeks.”

The New York Times shed some more light on this, reporting Tuesday that several U.S. chipmakers, including Micron and rival Intel Corp., had managed to get around the ban because many of their products are not actually produced in the U.S. As a result, those products aren’t subject to the ban and can still be sold to Huawei.

“A chip, for example, can still be supplied to Huawei if it is manufactured outside the United States and doesn’t contain technology that can pose national security risks.” the Times reported.

“Micron’s improved position reflects its renewed shipments to Huawei rather than any macro improvement in memory or storage,” analyst Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE.

Some parts of Micron’s business are still subject to the ban, however. During its conference call, Chief Financial Officer David Zinsner said sales of its Dynamic Random Access Memory and NAND flash memory products were hit by the restrictions on Huawei.

He said that if not for the restrictions, the company’s earnings would have come in at the higher end of its revenue guidance. Instead, Micron had to write down $40 million worth of inventory that had been earmarked for Huawei, Zinsner said.

The ban on Huawei sales will likely affect Micron’s sales during the next quarter, officials said. In its guidance for the current quarter, Micron said it expects earnings of around 45 cents per share, plus or minus 7 cents, on sales of $4.5 billion. Analysts had modeling earnings of 59 cents a share on sales of $4.48 billion.

“If Huawei continues to be on the entity list, then in fiscal year 2020 as well, we would have an impact compared to what our revenue with Huawei would have been if they were not on the entity listing,” Mehrotra said.

Analyst Charles King of Pund-IT Inc. told SiliconANGLE the balance of good and bad news probably surprised investors, but in the right way.

“Huawei’s impact on the company’s bottom line was far less than many had feared,” King said. “When you consider the part the ‘Huawei effect’ played in the -20% beatdown Micron stock suffered during the past quarter or so, it’s not surprising that the company’s shares popped after-hours. Overall, the company exits the quarter stronger than it did coming in.”

Still, other analysts said they were more worried by Micron’s long-term prospects. Holger Mueller of Constellation Research Inc. told SiliconANGLE the company had done well managing the expectations of its investors, but that he was concerned by a reported reduction in its capital expenditure.

“Reducing capex in a highly investment-focused market is a potential concern,” Mueller said. “All too often,it gets justified with demand and capacity alignment, but a few quarters later the R&D pipeline is raided as well.”

Photo: SiliconANGLE