Fears of peak iPhone rattle Asian Apple suppliers

Apple earlier told smartphone assemblers to halt plans for additional production lines dedicated to its new lower-priced iPhone XR. (Reuters)
Updated 13 November 2018

Fears of peak iPhone rattle Asian Apple suppliers

  • Following a poor forecast earlier this month, analysts and investors voiced concern over the state of Apple’s business
  • Apple warned earlier this month that holiday sales would miss Wall Street expectations

TAIPEI/SEOUL: Shares in Asian suppliers and assemblers for Apple Inc. 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 Inc, British chipmaker IQE Plc and Lumentum Holdings Inc, 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 Co. Ltd. (Foxconn) dropped more than 3 percent. Rival Pegatron Corp. 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 Co, fell 2.6 percent, while Flexium Interconnect Inc. 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, the iPhone shipment has reached its peak. For tech suppliers facing the future, they have no other big client like Apple.”
The Cupertino, California-based tech giant’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, which would persist in the coming quarters.
“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 including India and foreign-exchange costs.
Among other Apple suppliers in Asia, Hong Kong-based acoustic components maker AAC Technologies Holdings Inc. slumped more than 6 percent.
South Korean electronic parts suppliers Samsung Electro-Mechanics Co. Ltd, Apple’s supplier of multi-layer ceramic capacitors, dropped more than 5 percent, while LG Innotek Co. Ltd. plunged 9.5 percent.
Apple said earlier this month it would stop giving the number of iPhones, iPads and Mac computers it sold in a quarter, a closely watched metric and a key indicator of the company’s success.
The move led analysts to question the company’s business and its share price has since dropped 12.6 percent.
“(This) indicates that the company itself is not confident about its performance at the moment,” said Park Jung-hoon, a fund manager at HDC Asset Management, which owns Samsung Electronics shares.
“Although Apple has positioned itself as a super-expensive handset maker providing high-end products, its strategy has not been working in emerging markets including China and India as Chinese vendors have been making iPhone-like products,” he said.


Global shares rise as investors watch trade war

A view of the financial area of London. Last week, many stock indexes around the world struck their lowest levels this year, before a late rally suggested some calm was returning to the markets. (AFP)
Updated 5 min 26 sec ago

Global shares rise as investors watch trade war

  • Worries about waning growth across the world weigh heavily on market activities

LONDON: Global stock markets recovered some further ground Monday after last week’s turbulence when ongoing concerns about a trade war between the US and China and an array of worries about waning growth across the world weighed heavily on sentiment.

Last week, many stock indexes around the world struck their lowest levels this year, before a late rally suggested some calm was returning to the markets in what is a traditionally low-volume time of the year. Though stocks are healthier, the concerns that drove last week’s sell-off have not gone away and could resurface at any time.
“Markets actually ended last week on a relatively good note so what we may actually be witnessing right now is traders relishing the blissful trade war silence rather than anything more optimistic,” said Craig Erlam, senior market analyst at OANDA.
In Europe, France’s CAC 40 and Britain’s FTSE 100 were both up more than 1.2 percent, while Germany’s DAX rose 1.5 percent. US shares were set to open higher with Dow and S&P 500 futures both up 1.2 percent.
The steadier mood was evident in the fact that markets appeared to shrug off a report showing that one-third of economists surveyed by the National Association for Business Economics said they believe a slowing US economy will tip into recession in 2021. That’s up from 25 percent in the equivalent survey taken in February.
Trump spent a good portion of the last week tweeting about the US economy from his New Jersey golf club, trying to allay concerns of recession and offering an optimistic outlook for the economy after last week’s steep drop in the financial markets.
“I don’t think we’re having a recession,” Trump told reporters Sunday as he returned to Washington from his New Jersey golf club.
The president’s aides sought to reinforce that message during a series of appearances on the Sunday talk shows.
Investors are hoping that the US Federal Reserve will continue to cut interest rates to shore up economic growth. The central bank lowered interest rates by a quarter-point at its last meeting. It was the first time it lowered rates in a decade.
As well as keeping a close watch on developments surrounding the Fed, investors have to be careful not to be caught out by any news relating to the trade conflict between Washington and Beijing. That’s especially true after Trump’s announcement on Aug. 1 that he planned to extend tariffs across virtually all Chinese imports, many of them consumer products that were exempt from early rounds of tariffs. The tariffs have been delayed, but ultimately will raise costs for US companies bringing goods in from China.