Apple suppliers fall due to weak iPhone demand


The Cupertino, California-based tech giant's shares fell to their lowest in more than three months on Monday after three suppliers cut their forecasts for iPhone sales in the coming holiday season.

Among other Apple suppliers, South Korea's LG Innotek Co., which gets about half its revenue from Apple, slid as much as 9.5 percent.

Reprsenting 60% of Apple's revenues the latest iPhones are not selling at the same volume levels as in the past with suppliers now panicking as Companies such as Lumentum Holdings witnessing a 30% drop in share value due to cancelled orders.

Screen maker Japan Display cited lower smartphone demand in cutting its outlook, while British chipmaker IQE also said it expects a material reduction in its financial performance in the current year.

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.

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"Apple could have accumulated too much Lumentum inventory, and needs to work it off, in which case the unit shortfall is less, although it is still indicative of weak iPhone sales".

In the fourth quarter, Apple sold 46.9 million iPhones, missing analyst expectations of 47.5 million iPhones, according to FactSet.

The warning comes just a week after Japanese news service Nikkei reported that Apple asked its Chinese suppliers, including Foxconn, to halt plans for additional production lines of the XR.

With the iPhone XR being as it is, the Huawei Mate 20 series is providing an alluring alternative, which is hurting Apples potential sales. Shares of Lumentum plummeted a record 33 per cent while Apple dropped 5 per cent. Oclaro Inc., which is being bought by Lumentum, lost 12 per cent, its biggest drop since April. "With our proven ability to deliver high volumes, years of experience, hundreds of millions of devices in the field, and new product and customer funnel, we remain confident in our leadership position in the nascent market for laser diodes for 3D sensing". Lumentum's chips are not used in phones older than last year's iPhone X.

"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.