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Apple suppliers slump on lensmaker's poor revenue

Apple suppliers slump on lensmaker's poor revenue

Apple suppliers slumped on the Asian stock market on Thursday after Taiwanese lensmaker Largan Precision reported a 28.57% drop in revenue for November.

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07.12.2018 09:16 PM

Apple suppliers slumped on the Asian stock market on Thursday after Taiwanese lensmaker Largan Precision reported a 28.57% drop in revenue for November. The lackluster showing prompted a tech sell-off, with chip and electronic parts manufacturers hit by growing concerns that "peak iPhone" has passed.

Numerous recent reports have claimed that Apple has had to cut back on production levels for its latest slate of flagship smartphones, and the latest fall for Largan Precision, a key supplier of camera lenses for connected devices, has fanned further fears that the tech giant's momentum is flagging.

Largan Precision had a significant decline in year-on-year sales and revenue for last month and subsequently saw its share value plummet by 9.94%. Taiwan's Foxconn also went into the red to the tune of 3.63%, while Japan's TDK and South Korea's Samsung Electronics declined by 6.64% and 2.29% respectively on Thursday.

"The sell-off isn't surprising, since several major Apple suppliers – including Cirrus Logic, Qorvo, and Lumentum – all recently slashed their guidance, which suggests that Apple's iPhone shipments [have] peaked," tech and consumer goods expert, Leo Sun told CNBC.

The tech sector was already reeling from the news of the arrest of Huawei’s CFO in Canada, which has renewed concerns about the US-China trade standoff. Contract manufacturing giant Pegatron confirmed plans on Thursday to move production of non-iPhone products away from China to Indonesia in early 2019 as it looks to reduce the impact of US levies. Its shares were also down 5.29%.

It has been less than a week since US President Donald Trump and Chinese President Xi Jinping agreed on a 90-day truce at the G20 Summit. However, that agreement is already on shaky ground, as both sides appear to be offering conflicting versions of the finer details of the short-term deal. Sun said that many questions "remain unresolved."

When asked about the short-term economic outlook, he added: "The flattening (and potentially inverting) yield curve in the US bond market also strongly indicates that the economy is slowing down – which will throttle demand for chips across multiple industries."

Apple's stock fell by 4.40% earlier this week on the back of HSBC’s decision to downgrade the company's rating from buy to hold and issue a $5 reduction for its 12-month price target. Market watchers have been concerned about Apple's sustainability after the company announced that it would no longer provide up-to-date sales figures for iPhones.

"Apple's iconic hardware unit growth is broadly over for now," HSBC said in a note. "Revenues are only supported by higher selling prices and by the development of services. Flat unit growth has hit Apple's share price and incidentally its key suppliers. What has made the success of Apple, a concentrated portfolio of highly desirable (and pricey) products, is now facing the reality of market saturation."

It has been a challenging week for Apple suppliers, as Foxconn announced on Wednesday that it may set up a new factory in Vietnam to escape the downside risks associated with the long-running US-China trade war. A Vietnamese state media report said that the government is working with Foxconn to push forward with the plans.

Trade tensions between the world's two largest economies are forcing corporations across Asia to consider moving operations to new destinations, with Vietnam and Thailand at the top of the list. Foxconn has long been aware of trade risks and noted earlier this year that the standoff was its single biggest challenge. It added that its executives were working hard to come up with strategies to offset the impact.

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