Fewer orders at Apple suppliers could signal first iPhone sales decline

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TAIPEI (by J.R. Wu, Reuters) – Some of Apple Inc’s main Asian suppliers expect revenues and orders to drop this quarter, indicating iPhone sales are almost certain to post their first annual decline since the flagship product was launched almost a decade ago.

The forecasts of lackluster sales by companies including Taiwan Semiconductor Manufacturing Co (TSMC), the world’s biggest contract chipmaker, and smartphone camera lens producer Largan Precision Co Ltd add to concerns about Apple’s outlook amid slowing global demand for smartphones.

Industry executives say the latest iPhone did not have enough new features from the previous model to tempt users, raising fears that Apple’s innovative streak – and the profits it has generated – may be running its course.

Apple, which reports December-quarter results on Tuesday, declined to comment on its sales outlook.

“Visibility is only a month at a time and demand is quite weak,” Largan Precision Chief Executive Adam Lin told an earnings briefing, referring to his company’s overall business.

Other suppliers said Apple now only gave them orders one month in advance, instead of the usual three months.

“We have to be very flexible in terms of capacity,” said an executive at one of those firms, declining to identify their company or be named due to a confidentiality agreement that prevents Apple suppliers from discussing its order book.

Apple has previously said that individual data from its supply chain was not an accurate reflection of its outlook.

But TSMC, which makes some of the chips that go into iPhones, forecast this month that first-quarter revenues would likely fall by up to 11 percent year-on-year, adding that demand for high-end smartphones would also be weak.

An 11 percent quarterly decline would be the steepest revenue drop for TSMC in almost 7 years, Thomson Reuters data shows.

Earlier this month, people familiar with the matter told Reuters that Taiwan-based Foxconn, which assembles most iPhones, had taken a rare decision to cut working hours over a major holiday during which workers usually rack up overtime.

Foxconn, the trade name for Hon Hai Precision Industry Co Ltd, saw its December revenues slump by a fifth and 2015 sales miss expectations.

A more detailed picture about Apple’s outlook could emerge next week if key suppliers including LG Display Co Ltd, SK Hynix Inc and Samsung Electronics Co provide first-quarter forecasts when they report December-quarter earnings.

First-quarter revenues at both LG Display and Hynix are expected to fall around 10 percent, according to Thomson Reuters I/B/E/S data.

Analysts say iPhone sales could pick up during the second half of the year, when the company usually launches new products, but with competitors such as Samsung Electronics and Huawei Technologies Co Ltd [HWT.UL] sharpening their edge, some suppliers are not so sure.

“The pace of innovation has slowed. Apple is going toward the same direction as other brand names,” said another Taiwanese Apple supplier.

(Additional reporting by Se Young Lee in SEOUL and Miyoung Kim and Aradhana Aravindan in SINGAPORE; Editing by Miral Fahmy)



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