Apple Suppliers See Earnings Take Hits
May 13, 2016
As smartphone growth slows, electronics companies don’t see another major growth driver on horizon
Foxconn, which bought Japanese consumer-electronics giant Sharp for $3.5 billion, posted a 9.2% decline in its first quarter. PHOTO:ZUMA PRESS
Apple Inc.’s slowing sales are reverberating along the supply chain in Asia with iPhone component makers reporting weak earnings and cautious forecasts.
The latest results mark the end of an era of easy growth for not only Apple, but for the multibillion-dollar global supply chain that makes iPhones and other gadgets.
As smartphone growth slows with the sector’s maturation, suppliers say that they don’t see another product category on the immediate horizon that can be a major growth driver.
“We are all closely watching new areas, like the Internet of Things and automotive electronics,” said Charles Lin, chief financial officer of Pegatron Corp., a secondary iPhone assembler for Apple based in Taiwan. “But so far there is nothing nearly approaching the scale of smartphones.”
Last month Apple posted its first quarterlydecline in revenue in 13 years, as iPhone sales slowed. The U.S. technology giant’s performance reflected the weakness in the broader smartphone sector: 2015 was the last year for double-digit expansion of the global smartphone market, with this year’s growth rate expected to shrink to 5.7%, according to market research firm IDC. The expected launch of the next-generation iPhone should boost suppliers in the second half of the year, although analysts say it is unlikely to match the rapid growth of past years.
Foxconn Technology Group, Apple’s main iPhone assembler, on Thursday said its first-quarter net profit fell 9.2% to 27.58 billion New Taiwan dollars (US$848.2 million), from NT$30.39 billion a year earlier.
Pegatron’s first-quarter net profit dropped 35% to NT$4.1 billion from a year earlier.
Some component suppliers fared worse. Sharp Corp., which supplies screens for iPads and other companies’ gadgets, said on Thursday that its display unit posted an operating loss of ¥129.1 billion (US$1.19 billion) for its fiscal year ended in March, from a profit of ¥500 million in the previous year.
Sharp Chief Executive Kozo Takahashi said orders from major smartphone makers have slowed drastically in the final quarter of the year.
Japan Display Inc., also a screen provider for Apple, on Thursday reported a wider net loss for its fiscal year ended March 31 of ¥31.8 billion, from a loss of ¥12.3 billion in the previous year.
Sony Corp. Chief Financial Officer Kenichiro Yoshida said last month that his company, which supplies image sensors used in cameras, had overestimated demand. He noted, however, that orders should pick up in the second half of the fiscal year that started in April.
Sony’s device unit, which includes image sensors that the company supplies to Apple, swung to an operating loss of ¥28.6 billion for its recent fiscal year, from a year-earlier profit of ¥89 billion.
Last month Largan Precision Co., a Taiwanese company that makes camera modules for iPhones and other high-end smartphones, posted an 18% decline in its profit in the first quarter.
Japan’s Nidec Corp., which makes “haptic” components used for Apple’s Force Touch function in its phones and watches, said in April that it had overestimated market demand, with operating profit for the quarter coming in at ¥30.5 billion, ¥6.5 billion below what it expected.
Electronics suppliers went through a similar challenge when the personal computer market slowed, said UBS analyst Arthur Hsieh. The companies made a relatively easy transition to making smartphones, after the first iPhone was launched in 2007.
This time, it isn’t yet clear what the next growth driver will be, with new technologies such as virtual reality, smartcars and Internet-connected appliances all appearing promising, but still early-stage, he said.
“We are in a transition period,” Mr. Hsieh said.
Source: TWSJ
Apple Inc.’s slowing sales are reverberating along the supply chain in Asia with iPhone component makers reporting weak earnings and cautious forecasts.
The latest results mark the end of an era of easy growth for not only Apple, but for the multibillion-dollar global supply chain that makes iPhones and other gadgets.
As smartphone growth slows with the sector’s maturation, suppliers say that they don’t see another product category on the immediate horizon that can be a major growth driver.
“We are all closely watching new areas, like the Internet of Things and automotive electronics,” said Charles Lin, chief financial officer of Pegatron Corp., a secondary iPhone assembler for Apple based in Taiwan. “But so far there is nothing nearly approaching the scale of smartphones.”
Last month Apple posted its first quarterlydecline in revenue in 13 years, as iPhone sales slowed. The U.S. technology giant’s performance reflected the weakness in the broader smartphone sector: 2015 was the last year for double-digit expansion of the global smartphone market, with this year’s growth rate expected to shrink to 5.7%, according to market research firm IDC. The expected launch of the next-generation iPhone should boost suppliers in the second half of the year, although analysts say it is unlikely to match the rapid growth of past years.
Foxconn Technology Group, Apple’s main iPhone assembler, on Thursday said its first-quarter net profit fell 9.2% to 27.58 billion New Taiwan dollars (US$848.2 million), from NT$30.39 billion a year earlier.
Pegatron’s first-quarter net profit dropped 35% to NT$4.1 billion from a year earlier.
Some component suppliers fared worse. Sharp Corp., which supplies screens for iPads and other companies’ gadgets, said on Thursday that its display unit posted an operating loss of ¥129.1 billion (US$1.19 billion) for its fiscal year ended in March, from a profit of ¥500 million in the previous year.
Sharp Chief Executive Kozo Takahashi said orders from major smartphone makers have slowed drastically in the final quarter of the year.
Japan Display Inc., also a screen provider for Apple, on Thursday reported a wider net loss for its fiscal year ended March 31 of ¥31.8 billion, from a loss of ¥12.3 billion in the previous year.
Sony Corp. Chief Financial Officer Kenichiro Yoshida said last month that his company, which supplies image sensors used in cameras, had overestimated demand. He noted, however, that orders should pick up in the second half of the fiscal year that started in April.
Sony’s device unit, which includes image sensors that the company supplies to Apple, swung to an operating loss of ¥28.6 billion for its recent fiscal year, from a year-earlier profit of ¥89 billion.
Last month Largan Precision Co., a Taiwanese company that makes camera modules for iPhones and other high-end smartphones, posted an 18% decline in its profit in the first quarter.
Japan’s Nidec Corp., which makes “haptic” components used for Apple’s Force Touch function in its phones and watches, said in April that it had overestimated market demand, with operating profit for the quarter coming in at ¥30.5 billion, ¥6.5 billion below what it expected.
Electronics suppliers went through a similar challenge when the personal computer market slowed, said UBS analyst Arthur Hsieh. The companies made a relatively easy transition to making smartphones, after the first iPhone was launched in 2007.
This time, it isn’t yet clear what the next growth driver will be, with new technologies such as virtual reality, smartcars and Internet-connected appliances all appearing promising, but still early-stage, he said.
“We are in a transition period,” Mr. Hsieh said.
Source: TWSJ