Apple outlook dims as suppliers worldwide sound the alarm - TechCentral

Apple outlook dims as suppliers worldwide sound the alarm

The bad news keeps piling up for Apple ahead of the crucial holiday season.

AMS, a Austria-based maker of light sensors for smartphones, became at least the fourth key supplier to the US company this week to reduce revenue estimates for the current quarter. The spate of warnings, coupled with underwhelming earnings from main iPhone assembler Hon Hai Precision Industry, underscore concerns about weak demand for Apple’s bread-and-butter device.

Apple is headed for its longest losing streak in more than six months as investors reassess the company’s growth prospects. Faced with a maturing smartphone market, its strategy has been to entice customers to pay more for phones with new features such as facial recognition, while sales of services from video to music are growing at a rapid clip. But the company still relies on the iPhone for the bulk of its revenue, and the jury’s still out on whether its latest line-up is a bona fide hit.

The accumulation of warning signs has prompted analyst revisions in the past week. Guggenheim on Wednesday said the company’s recent reliance on rising average selling prices was “no longer enough” to boost growth at a time unit sales show signs of slowing. Shares in Japan Display, one of the quartet that reduced its sales outlook, slid as much as 8.4% on Thursday.

The “iPhone’s nearly 60% contribution to revenue and profits looking like a headwind again”, Guggenheim wrote in a Wednesday research note.

Apple’s decision to stop disclosing unit sales for its main gadgets including the iPhone, iPad and MacBook — which Hon Hai also assembles — has fuelled concerns surrounding the outlook for component makers that depend on volume growth. AMS, whose largest customer is Apple, said on Wednesday it’s cutting projections for fourth-quarter sales to US$480-million to $520-million, from $570-million to $610-million just last month.

Four major suppliers

AMS blamed the reduction on “recent demand changes from a major consumer customer”, a similar explanation to those offered by Qorvo, Lumentum Holdings and Japan Display this week when they, too, unexpectedly reduced their outlooks. Cupertino, California-based Apple likes to diversify its suppliers, but four major component makers reducing revenue forecasts in the same week could mean the company is bracing for lower than expected sales of its latest devices.

None of the companies specifically cited Apple but the iPhone maker is the largest customer and biggest revenue driver for all four, according to data compiled by Bloomberg. Qorvo gets 36% of revenue from Apple, Lumentum generates 30%, AMS receives more than 20% and Japan Display gets 55%.

Apple’s new iPhone Xs and Xs Max

AMS makes what is known as an ambient light sensor, which helps measure how far a phone is from a user, for the Face ID facial recognition system on Apple’s iPhones. Qorvo makes wireless chips, while Lumentum makes 3D laser sensors for Face ID. Japan Display makes smartphone screens.

Their warnings come as a once-red-hot global smartphone market has flat-lined as economic uncertainty spreads, and a persistent lack of new or innovative devices discourages buyers. Apple itself has reported disappointing iPhone sales and projected holiday-quarter revenue below expectations.  — Reported by Mark Gurman, with assistance from Edwin Chan, (c) 2018 Bloomberg LP

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