Apple Supplier AMS Cuts Revenue Forecast, Indicates Lower iPhone Sales

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AMS AG, which manufactures facial recognition technology, reduced its outlook for the fourth-quarter revenue by 15 per cent and cut down its medium-term targets

Another major supplier of Apple, Austria-based light sensors for smartphones AMS AG, cuts its revenue forecast for the present quarter this week, indicating towards the declining sales of latest iPhones.

The Swiss-listed group, which manufactures facial recognition technology,
reduced its outlook for the fourth-quarter revenue by 15 per cent and cut down its medium-term targets, citing recent changes in demand from a key customer, reported a leading international news agency.

Though AMS AG did not name its customer Apple, but it is estimated by analysts as the US-based giant makes up for about 40 per cent of the company’s sales.

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The number warnings, along with underwhelming revenues from major assembler of iPhone, Hon Hai Precision Industry Co, underline the concerns regarding weak demand for Apple’s largest selling device.

Suppliers indicate weakness in iPhone demand

Investors were shocked, when two weeks ago the iPhone maker came out with lower than estimated sales forecast for the fourth quarter. This prompts the Apple’s suppliers such as US-based Lumentum, screen maker Japan Display and UK’s chipmaker IQE to issue warnings that indicated weakness in sales of new iPhones.

This week, Lumentum claimed that one of its major customers had reduced orders by around 30 per cent. Another supplier, Foxconn has also reported lower growth profit.

Like Lumentum, AMS provides software components required for the iPhone’s FaceID technology.

Last week, a supply chain report recommended that Apple had reduced estimates for iPhone XR production by about 20-25 percent. In addition, an analyst Ming-Chi Kuo, in a note to investors, revised the estimates for new iPhone XR shipment from 100 million to 70 million.

Dialog Semiconductor, manufacturer of semiconductor-based system solutions, which signed a deal of US$ 600 million with Apple in October bucked the negative trend when it recently said it does not see a decline in demand from Apple.

Dialog Semiconductor in justification of this by stating that the company supplies several more products other than the new iPhones.

Declining iPhone sales

Over the last year, investors had majorly been ready to overlook the deteriorating unit sales of iPhones because the average selling prices kept on increasing. However, the American giant is facing severe competition from mid-price range phones from Chinese manufacturers such as Xiaomi.

The buildup of concerns has prompted the analyst to revise their estimates in the past week. Guggenheim Partners predicted a 5 per cent drop in the number of iPhones units sold in 2019. It further said that the company’s reliance on increasing average selling prices was not enough to push growth at a time when the unit sales showing signs of a drop.

Apple has started selling its latest models of iPhone – XS and XS Max in September and XR model in October.

According to a note by Credit Suisse, the latest guidance by AMS suggested that there are around 11 to 18 million lesser iPhones would be manufactured in the present quarter than initially expected number of 77-82 million.

The revenue estimates of AMS come in between US$ 480 million and US$ 520 million during the fourth quarter of 2018, as compared to $570-$610 million estimated last month.

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