Apple concerns hit supplier stocks
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Shares in Asian suppliers and assemblers for Apple fell on Tuesday after several component makers warned of weaker than expected results, leading some market watchers to call the peak for iPhones in several key markets. Following a poor forecast earlier this month, analysts and investors voiced concern over the state of Apple’s business, contributing to growing worries that iPhone sales were stagnating and could hurt suppliers.
Fresh warnings on Monday from screen maker Japan Display, British chipmaker IQE and Lumentum Holdings, the main supplier of the Face ID technology in the latest generation of iPhones, hurt technology stocks in Asia on Tuesday.
Taiwan-based assembler Hon Hai Precision Industry (Foxconn) dropped more than 3 percent. Rival Pegatron fell more than 5 percent but later recouped losses. Both companies count Apple as a major customer.
The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing, fell 2.6 percent, while Flexium Interconnect was down 1.5 percent. The Taiwan Weighted Index was down around 1.6 percent.
“Apple’s iPhone weakness has been a long-term issue for the Asia supply chain,” said Arthur Liao, an analyst at Fubon Research in Taipei.
“For Apple, iPhone shipment has reached its peak. For tech suppliers facing the future, they have no other big client like Apple.”
The company’s shares fell to their lowest level in more than three months on Monday.
Last week, a media report saying the iPhone maker had told its smartphone assemblers to halt plans for additional production lines dedicated to its new lower-priced iPhone XR had pressured supplier stocks.
Analysts said the lack of technological breakthroughs had put a cap on demand.
“With no new technology in sight next year for the supply chain, this is not ideal for the companies involved,” said Nicole Tu, a Taipei-based analyst at Yuanta Investment Consulting.
“Up through the first half of 2019, we likely won’t see any breakthrough.”
Lumentum on Monday slashed its profit and revenue forecast for the current quarter, while IQE warned that current-year results would be lower. Japan Display lowered both sales and margin outlook for the year as well.
Apple warned earlier this month that holiday sales would miss Wall Street expectations due to weakness in emerging markets.
Questions & Answers
Q.Which specific Apple suppliers were mentioned as having issued warnings?
Which specific Apple suppliers were mentioned as having issued warnings?
Screen maker Japan Display, British chipmaker IQE, and Lumentum Holdings, the main supplier for Face ID technology, all issued fresh warnings on Monday about their forecasts.
Q.What reason did analysts give for the current cap on demand for iPhones?
What reason did analysts give for the current cap on demand for iPhones?
Analysts attributed the cap on demand to a lack of technological breakthroughs. They also noted that no new technology is expected for the supply chain through the first half of 2019.
Q.Which major Apple assembler experienced the biggest drop in shares on Tuesday?
Which major Apple assembler experienced the biggest drop in shares on Tuesday?
Taiwan-based assembler Pegatron initially fell more than 5 percent, making it the biggest drop mentioned. However, it later recouped some of those losses.
Q.What earlier event this month contributed to investor concerns about Apple's business?
What earlier event this month contributed to investor concerns about Apple's business?
Earlier this month, Apple itself warned that its holiday sales would miss Wall Street expectations. This was attributed to weakness in emerging markets, adding to investor concerns.
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