How Apple Caused A Market Tumble In Taiwan

When Apple succeeds, their suppliers succeed. And when Apple disappoints, the ramifications echo throughout the supply chain.

This chain reaction became prominent during Apple’s most recent quarterly earnings report, released last week. The company sold an impressive 47.5 million iPhones, but that wasn’t enough to prevent a stock drop, resulting in a $66 billion market cap reduction. Apple Watch sales also failed to meet expectations.

It was bad news for Apple and its investors, but the company’s dozens of tiny suppliers positioned across the globe saw similar stock declines following the report.

According to CNNMoney, Apple microchip manufacturer Cirrus Logic saw a 7 percent decline in its shares. The supplier’s operations depend on Apple to succeed, with 72 percent of its 2015 sales stemming straight from the technology conglomerate, reports said.

In its own report, Cirrus acknowledged that investors are concerned about Cirrus’ lack of portfolio diversity. But according to CNNMoney, working with more corporate buyers may not help these technology suppliers out enough. Reports said NXP Semiconductors saw a 5 percent stock drop last week; the company makes radio chips for Apple Pay. Similarly, chip maker Skyworks Solutions, which works with several corporate buyers including Apple, saw its own 6 percent decline in the wake of Apple’s earnings report.

According to CNNMoney, several other suppliers, including Avago Technologies, Qualcomm, Taiwan Semiconductor Manufacturing and Broadcom, all saw their own shares fall soon after Apple released its report.

“The iPhone pain extends beyond Apple itself,” CNNMoney said. “It’s slamming the iPhone ecosystem, the collection of companies that supply the sophisticated technology powering the devices.”

The reports highlight just how global Apple’s supply chain really is and how a missed target of iPhone sales in one quarter can make a significant dent in an economy half a world away.

Bloomberg reports last week highlighted the impact of Apple’s earnings report on Taiwan’s entire stock market, for example, thanks to the high number of Taiwanese suppliers that gain a large portion of their business from Apple.

“Taiwan’s stocks extended declines to a nine-month low,” the reports said, “led by technology companies that bore the brunt of the losses after disappointing results from Apple Inc.”

According to Bloomberg, Taiwan’s Taiex index dropped by 1.4 percent, its lowest level since October. That loss was led by companies like Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co., another Apple supplier.

It may seem that these small suppliers — and indeed, even entire economies — can depend on single mega-conglomerates like Apple. But recent reports show just how Apple is dependent upon those suppliers to access the most cutting-edge technology, key to preventing another disappointing quarterly earnings report.

The International Business Times revealed earlier this month that one of Apple’s leading iPhone suppliers, TSMC, is reported to be working on a new chip technology and gearing up for production in 2016–2017. Intel is also in the race to roll out a “breakthrough” new chip technology, and whichever supplier wins that race, reports said, will likely be picked as Apple’s primary supplier.

And even as Apple’s iPhone sales missed the mark, 47.5 million unit sales is nothing to scoff at. With even more unit sales anticipated for the rest of the year, Apple’s dozens of Taiwan-based suppliers are reportedly expanding production facilities and revving up operations, all of which will likely see their own bump in sales — and shares — after stronger Apple sales reports.

While the markets will have to wait to see how Apple performs in the coming quarters, the firm’s most recent results have brought to light how interconnected the global supply chain is and how corporate buyers and some of the smallest suppliers can all move markets, for better or for worse.