Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Apple Suppliers Tumble on New Signs of Weak iPhone Demand

Published 2018-11-12, 09:15 p/m
Updated 2018-11-13, 12:40 a/m
© Bloomberg. A customer displays an Apple Inc. iPhone XS Max box during a sales launch at a store in Chicago, Illinois, U.S., on Friday, Sept. 21, 2018.  Photographer: Daniel Acker/Bloomberg

© Bloomberg. A customer displays an Apple Inc. iPhone XS Max box during a sales launch at a store in Chicago, Illinois, U.S., on Friday, Sept. 21, 2018. Photographer: Daniel Acker/Bloomberg

(Bloomberg) -- Major suppliers to Apple Inc (NASDAQ:AAPL).’s iPhone fell Tuesday as investors fretted that one of the most important product lines in the technology sector was seeing weak demand.

In Asia, Japan Display Inc. slashed its forecasts for sales growth and operating margins, citing volatile customer demand. JDI, which makes LCD screens used in the iPhone XR, plunged as much as 11 percent to its lowest since debuting in 2014. Lumentum Holdings Inc. plummeted a record 33 percent after cutting its second-quarter outlook when one of its largest customers asked to “meaningfully reduce shipments” for previously placed orders.

Lumentum, a maker of parts used for facial recognition, didn’t name the customer but Apple is its biggest, according to Bloomberg supply-chain data. Apple fell 5 percent. Oclaro Inc., which is being bought by Lumentum, lost 12 percent, its biggest drop since April.

“Investors should consider Lumentum’s updated guide as reflecting as much as a 30% cut in Apple orders,” Wells Fargo (NYSE:WFC) analyst Aaron Rakers said in a note to clients.

“Concerns of JDI’s survival are likely to persist,” Jefferies analyst Atul Goyal wrote in a note to clients. “With uncertainty/volatility in the demand for its major customer’s new models” and more phone makers switching to new technologies, the sustainability risk to its fundamentals still remains, he added.

Lumentum executives told investors at a UBS Group AG conference in San Francisco that the customer asked to cut 3-D component shipments just days ago after having requested expedited orders in recent weeks.

The development “is not entirely surprising” but “it seems very likely to us that the market for 3D sensing-related light sources and other components is going to be smaller next year than previously anticipated,” James Kisner, an analyst with Loop Capital Markets, said in a research note.

Apple didn’t immediately reply to a request for comment late Monday.

Among other Apple suppliers, South Korea’s LG Innotek Co., which gets about half its revenue from Apple, slid as much as 9.5 percent. Japan’s Minebea Mitsumi Inc. slid 7.2 percent and Alps Electric Co. dipped 8.9 percent. Taiwan’s Catcher Technology Co. fell 5.1 percent and Visual Photonics Epitaxy Co. slumped 8.9 percent. In China, Lens Technology Co. dropped 2.5 percent.

U.S. chipmakers Cirrus Logic Inc. sank 14 percent, and Qorvo Inc. and Broadcom (NASDAQ:AVGO) Inc. each slid 6.4 percent. ON Semiconductor Corp. fell 5.9 percent, Skyworks Solutions Inc. slid 5 percent, and Finisar Corp. dropped 4 percent. Semiconductor stocks were broadly lower with the Philadelphia Semiconductor Index losing 4.4 percent.

Lumentum’s outlook comes a week after Nikkei reported that Apple was canceling a production boost for its iPhone XR line, and less than two weeks after Apple’s fourth-quarter results showed tepid unit sales growth. 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.”

Adding to Monday’s negative news, Longbow Research cautioned that Apple is facing weak iPhone demand in China. And Citi downgraded Skyworks to neutral and slashed its price target to $85 from $116, citing both “disappointing iPhone XR unit sales” and “broad smartphone weakness.” Last week, Skyworks gave a first-quarter outlook that missed expectations because of smartphone weakness, prompting at least two other downgrades.

Citi also cut its target on Qorvo on Monday due to iPhone XR weakness.

(Updates with Asian suppliers throughout.)

© Bloomberg. A customer displays an Apple Inc. iPhone XS Max box during a sales launch at a store in Chicago, Illinois, U.S., on Friday, Sept. 21, 2018.  Photographer: Daniel Acker/Bloomberg

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.