Apple Suppliers Drop Globally After IPhone Output Cut Report

  • Dialog Semi, AMS, ARM drop after Apple fallout in Asia markets
  • Nikkei Asian Review reports cut of 30% in first quarter

Putting Apple’s iPhone Production Cut Into Perspective

Apple Inc. suppliers from Asia to Europe fell after a report saying the world’s most valuable company would reduce first quarter output of its latest iPhones by about 30 percent.

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Dialog Semiconductor Plc, which makes chips used in the iPhone and gets most of its sales from Apple, lost as much as 6.6 percent in Frankfurt after Nikkei Asian Review reported the output cut. Earlier today in Asia, suppliers led by Sharp Corp. and Pegatron Corp also fell.

“There is a risk inventory adjustment will continue and will not be over by March,” said Yasuaki Kogure, chief investment officer at SBI Asset Management Co. Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, declined to comment. Dialog, based in Reading, England, reiterated its forecast when contacted by phone today while declining to comment on the report.

Inventories of the new iPhones, which debuted in September, have piled up at retailers in China and Europe amid lackluster sales as an increase in the dollar against other currencies makes the device more expensive in those countries, Nikkei reported. Apple had initially told suppliers to keep production of the iPhone 6s and 6s Plus models for the January-March period at the same level as for their predecessors, the publication said.

Dialog dropped 3.4 percent to 29.78 euros a share at 11:15 a.m. in Frankfurt. Dialog’s Austrian rival AMS AG fell 4.8 percent to 31.05 Swiss francs, while ARM Holdings Plc, the semiconductor designer whose technology is used in most smartphones, slumped 3.1 percent to 972.50 pence in London.

Earlier today in Asia, Sharp dropped 3.3 percent at the close in Tokyo. Japan Display Inc. slumped 3.5 percent. The Japanese companies both supply screens for Apple devices. Pegatron, which assembles iPhones, fell 5.7 percent in Taipei. Sharp spokesman Toyodo Uemura and Ryoichi Imai, a spokesman for Japan Display, declined to comment on the report.

Toward the end of last year, many analysts began predicting that sales of Apple’s best-selling product would decline in 2016, based on supply chain issues and weaker demand especially from saturated, developed markets. Apple’s growth is increasingly dependent on demand for iPhones, while iPad tablet sales slow and adoption of the Apple Watch remains modest. Apple predicted in October that it would have another record holiday quarter.

“With poor end demand for iPhone 6s in developed markets, we estimate that the supply chain has accumulated 20 million units of iPhone inventory including finished goods and components,” Ken Hui, an analyst at Jefferies Group LLC in Hong Kong, wrote in a report.