Apple's Slowing iPhone Sales Take Bite Out of Suppliers' Revenue
January 14 2016 - 6:47AM
Dow Jones News
By Eva Dou
TAIPEI--Companies that make parts for Apple Inc. are warning of
lower first-half revenues, in a sign of slowing sales of the latest
iPhones.
Taiwan Semiconductor Manufacturing Co., which manufactures the
chips that run iPhones and other popular electronic devices,
forecast Thursday its first-quarter revenue would decline by as
much as 10.8% from the previous year, citing demand weakness for
high-end smartphones.
Apple components contribute 20% of sales for TSMC, the world's
largest contract chip maker, according to a Credit Suisse
report.
Largan Precision Co., which supplies iPhone camera modules, said
it expected "quite a weak" first quarter, while Catcher Technology
Co., a maker of iPhone metal casings, said its revenue for the
first half would be flat from a year earlier.
Samsung Electronics Co., which also supplies the computing
brains in smartphones, known as processors, earlier this month said
it expects competition will intensify this year for all of
Samsung's main products including memory chips. In addition to
supplying components to Apple, Samsung competes with the Cupertino,
Calif.-based company in selling smartphones.
The first half of the year is traditionally a slow season for
Apple's supply chain and the broader gadget industry. But this
year's slowdown is likely to be more pronounced, with sluggish
sales of the iPhone 6S and iPhone 6 Plus launched last fall,
compared with the booming popularity of the iPhone 6 in 2014, said
people familiar with iPhone production.
Apple has cut its order forecasts to iPhone suppliers in the
past few months, The Wall Street Journal reported last week.
Such concerns have pushed Apple's stock price below $100 for the
first time in 15 months and hit stocks of iPhone suppliers.
"We see a reduction in high-end smartphone demand," said Mark
Liu, one of TSMC's co-chief executives, at an investor conference
Thursday, without mentioning specific customers. He said China and
other emerging markets, however, were showing "signs of recovery"
and that TSMC expected to return to growth after the first
quarter.
TSMC forecast revenue of between 198 billion New Taiwan dollars
(US$5.93 billion) and NT$201 billion in the first quarter, down
9.5% to 10.8% from a year earlier and 1.2% to 2.7% lower from the
fourth quarter. Still, the company said it expected to boost
capital expenditure this year by 10% to 20% to between $9 billion
and $10 billion.
Mr. Liu said TSMC expected the global smartphone market to hold
up better than other electronics segments in 2016. TSMC forecast 8%
growth in global smartphone-unit shipments this year, versus 3% and
7% declines for personal computers and tablets, respectively.
Suppliers are giving brighter outlooks for the full year,
however, with Apple expected to launch its next-generation iPhone
that should have more new features than the iPhone 6S, based on its
pattern of a major iPhone upgrade every two years.
A spokesman for Pegatron Corp., which makes some iPhones, said
his company expected its smartphone sales to grow for the full
year. He declined to comment on the outlook for the first half.
C.C. Wei, another TSMC co-chief executive, said the company
planned to begin production of chips in the second quarter, using
its new "InFO" technology that allows for thinner chipsets--and
therefore slimmer gadgets.
This technology won't be widely adopted by TSMC's customers in
2016, but there will be "a few, very large-volume customers," he
said. Bernstein Research analyst Mark Li wrote in a report in
October that Apple will be TSMC's only meaningful customer for InFO
this year, with the technology allowing better performance and a
thinner chipset for the next-generation iPhone.
A spokeswoman for Apple referred to comments made by Apple Chief
Executive Tim Cook on an earnings call in 2013 during which he said
it was difficult to accurately extrapolate business outlooks from
individual data points in the supply chain.
"There's just an inordinately long list of things that would
make any single data point not a great proxy for what's going on,"
he said at the time.
TSMC said Thursday its fourth-quarter net profit fell 8.9% to
NT$72.84 billion from NT$79.99 billion a year earlier. The result
marked a slowdown from the previous year's rapid growth when TSMC
began supplying processors for Apple's iPhones and tablets. In the
2014 fourth quarter, its net profit rose 79%, hitting a new
quarterly record.
TSMC's revenue fell 8.5% to NT$203.52 billion in the three
months ended Dec. 31 from NT$222.52 billion a year earlier.
Write to Eva Dou at eva.dou@wsj.com
(END) Dow Jones Newswires
January 14, 2016 07:32 ET (12:32 GMT)
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