BBY Best Buy Company

   (FROM THE WALL STREET JOURNAL 1/15/16) 
   By Eva Dou 

TAIPEI -- Companies that make parts for Apple Inc. are warning of lower first-half revenue this year, 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 as much as 11% from the previous year, citing soft demand 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 expects "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. Largan and Catcher are based in Taiwan.

South Korea's Samsung Electronics Co., which also supplies the computing brains in smartphones, known as processors, earlier this month said it expects competition will intensify for all of Samsung's main products, including memory chips. In addition to supplying components to Apple, Samsung competes with the U.S.-based company in selling smartphones.

The year's first half is traditionally a slow season for Apple's supply chain and the broader gadget industry. But this year's slowdown could 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.

Best Buy Co. said Thursday that its holiday sales declined as the U.S.-based retailer sold fewer smartphones than expected, another indication of soft demand for the latest models from Apple and Samsung. The electronics chain said domestic sales over the nine weeks through Jan. 2 fell 1.2%, excluding newly opened or closed stores.

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. Shares in Apple rose 2.2% to $99.52 on the Nasdaq Stock Market on Thursday.

"We see a reduction in high-end smartphone demand," said Mark Liu, one of TSMC's co-chief executives, at an investor conference on Thursday, without mentioning specific customers. He said China and other emerging markets, however, were showing "signs of recovery" and that TSMC expects to return to growth after the first quarter.

TSMC forecast revenue of between 198 billion New Taiwan dollars and NT$201 billion (US$5.93 billion and US$6.02 billion) for the first quarter, down 9.5% to 11% from a year earlier and off 1.2% to 2.7% from the fourth quarter.

Still, the company said that it expects to boost capital expenditure this year by 10% to 20% to between $9 billion and $10 billion.

Mr. Liu said TSMC expects 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 and tablet computers, respectively.

Suppliers are providing brighter outlooks for the full year, with Apple expected to launch a next-generation iPhone. A spokesman for Pegatron Corp., which makes some iPhones, said his Taiwan-based company expected its full-year smartphone sales to grow.

C.C. Wei, another TSMC co-chief executive, said the company plans to begin production of chips in the second quarter, using its new "InFO" technology that allows for thinner chipsets -- and therefore slimmer gadgets.

Bernstein Research analyst Mark Li wrote in a report in October that Apple will be TSMC's only meaningful customer for InFO this year.

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," Mr. Cook 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. Revenue fell 8.5% to NT$203.52 billion.

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Drew FitzGerald in New York contributed to this article.

(END) Dow Jones Newswires

January 15, 2016 02:47 ET (07:47 GMT)

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