Apple's Suppliers Sound Revenue Warnings
January 15 2016 - 3:02AM
Dow Jones News
(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.
---
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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