As Apple scales back its projected orders for its latest iPhone, suppliers are preparing for a revenue hit.
As The Wall Street Journal reported Thursday (Jan. 14), a manufacturer of the chips that Apple uses to run its mobile phones is forecasting an 11 percent drop in first quarter revenue compared to the previous year.
Taiwan Semiconductor Manufacturing (TSMC) is laying the blame on slowing demand in the market for high-end smartphones. The making of Apple components reportedly makes up nearly 20 percent of TSMC’s sales.
Camera module manufacturer and Apple iPhone supplier Largan Precision told WSJ that it is also expecting a weak first quarter, while the company that produces the iPhone’s metal casings, Catcher Technology, is predicting its revenue would be flat from a year earlier.
The sluggish sales of Apple’s iPhone 6s and 6s Plus have contributed to reports that the company is looking to cut back on production of the devices in the coming months.
Last week, the Nikkei Asian Review reported that inventories of Apple’s iPhone 6s and 6s Plus have swelled since the phones were released last September and production may be reduced by as much as 30 percent until dealers are able to go through their current stock.
“This is an eye-opening production cut, which speaks to the softer demand that Apple has seen with 6s out of the gates,” FBR Capital Markets Analyst Daniel Ives told Reuters. “The Street was bracing for a cut, but the magnitude here is a bit more worrisome.”
As Reuters reported on Jan. 5, Apple’s stock fell following the report, as did the shares of its suppliers, Skyworks Solutions, Qorvo and Cirrus Logic, among others.
The estimate for this calendar year is that Apple’s iPhone sales will dip 2.9 percent to 224,000 units, which is below the early projections by about 33 million for fiscal year 2016 and off by 28 million for calendar year 2016. As a result of the shifting tide for what could come for Apple, Morgan Stanley lowered its Apple price target last month by 12 percent.