Apple suppliers' dim outlook signals fall in iPhone sales

A wafer at TSMC, the world's biggest contract chipmaker. The company, which supplies some of the chips that go into the iPhone, says first-quarter revenues will likely fall by up to 11 per cent year-on-year.
A wafer at TSMC, the world's biggest contract chipmaker. The company, which supplies some of the chips that go into the iPhone, says first-quarter revenues will likely fall by up to 11 per cent year-on-year.PHOTO: REUTERS

TAIPEI • Some of Apple's main Asian suppliers expect revenues and orders to drop this quarter, indicating iPhone sales will likely post their first annual decline since the flagship product was launched almost a decade ago.

The forecasts of lacklustre sales by firms including Taiwan Semiconductor Manufacturing (TSMC), the world's biggest contract chipmaker, and smartphone camera lens producer Largan Precision add to concerns about Apple's outlook amid slowing global demand for smartphones.

Industry executives say the latest iPhone does not have enough new features to tempt users, raising fears that Apple's innovative streak - and the profits it has generated - may be running its course.

Apple, which reports December quarter results today, declined to comment on its sales outlook. "Visibility is only a month at a time and demand is quite weak," Largan Precision CEO Adam Lin told an earnings briefing, referring to his company's overall business.

Some suppliers said Apple now gave them orders only one month in advance, instead of the usual three months. "We have to be very flexible in terms of capacity," said one executive, declining to identify his company or be named due to a confidentiality agreement that prevents Apple suppliers from discussing its order book.

Apple has previously said individual data from its supply chain did not accurately reflect its outlook.

But TSMC, which makes some of the chips that go into iPhones, this month forecast first-quarter revenues would likely fall by up to 11 per cent year-on-year, adding that demand for high-end smartphones would also be weak.

A quarterly fall of 11 per cent would be the steepest revenue drop for TSMC in almost seven years, according to Thomson Reuters data.

Earlier this month, Taiwan- based Foxconn, which assembles most iPhones, took a rare decision to cut working hours over a major holiday during which workers usually rack up overtime, sources said.

Foxconn, the trade name for Hon Hai Precision Industry, saw its December revenues slump by a fifth and 2015 sales miss expectations.

Analysts say iPhone sales could pick up during the second half of the year, when Apple usually launches new products, but with competitors such as Samsung Electronics and Huawei Technologies sharpening their edge, some suppliers are not so sure.

"The pace of innovation has slowed. Apple is going towards the same direction as other brand names," said another Taiwanese Apple supplier.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 26, 2016, with the headline 'Apple suppliers' dim outlook signals fall in iPhone sales'. Print Edition | Subscribe