Tuesday, 18 December, 2018

Apple suppliers tumble on new signs of weak iPhone demand

More Evidence Emerges of Soft iPhone Sales Apple, suppliers tumble as signs mount of weak iPhone demand
Jodi Jackson | 14 November, 2018, 05:40

A woman checks her phone at a flagship Apple store at Iconsiam shopping mall in Bankok, Thailand.

Major suppliers to Apple Inc.'s iPhone fell Tuesday as investors fretted that one of the most important product lines in the technology sector was seeing weak demand.

Investors interpreted the news as cut in orders from Apple, which would jibe with the new iPhone 7 and 8 demand forecasts because those models don't use Face ID.

Taiwan-based assembler Hon Hai Precision Industry Co Ltd (Foxconn) dropped more than 3 percent. Semiconductor stocks were broadly lower with the Philadelphia Semiconductor Index losing 4.4 percent.

Although Apple never said as much when it launched the Apple iPhone XR in September, its fairly obvious the device is meant to be more a direct competitor with the Android market.

"Some people may fear that this now means that the iPhone units are going to start going negative year over year because it's easier to talk about great things and not show the details of things that aren't so great", Citi analyst Jim Suva said during the conference call. With November already in full swing, it will be interesting to see if Apple embarks on a huge iPhone XR marketing push over the coming weeks.

Apple shares fell to their lowest in more than three months on Monday as three suppliers issued warnings on results that pointed to weakness in iPhone sales. JP Morgan is now expecting the iPhone XR to account for 39% of new iPhones sold in the second half of 2018, down from its previous forecast of 47%. Japan Display lowered both sales and margin outlook for the year as well.

The Nikkei report came days after Apple warned in its quarterly earnings report that sales for the crucial holiday quarter would likely miss Wall Street expectations. But when a sale does happen, suppliers get a one-time payment for their component, while Apple can generate hundreds of extra dollars per gadget. Shares of Lumentum plummeted a record 33 per cent while Apple dropped 5 per cent. Oclaro Inc., which is being bought by Lumentum, lost 12 per cent, its biggest drop since April. The company also said it would stop providing unit sales for iPhones, iPads, and Macs in fiscal 2019, a step Nomura Instinet said raised "the specter of a sustained iPhone downturn".

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