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Apple Suppliers Lower 2019 Forecast After ‘Extraordinary’ Drop in Chinese iPhone Demand

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Apple Suppliers Lower 2019 Forecast After ‘Extraordinary’ Drop in Chinese iPhone Demand

Nidec, the sole supplier of vibration motors to Apple, has reduced its full year profit outlook

Highlights
  • TSMC has also reduced its revenue forecast for this quarter
  • Apple is reportedly planning a hiring freeze after slowing iPhone demand
  • An analyst predicts Apple will reduce the price of iPhone XR in China

The drop in the Chinese demand for iPhone models is forcing many Asian Apple suppliers to cut their 2019 forecasts, a Japanese media report claims. As the trade war between US and China continues to cast a wide shadow on the global economy, Nidec, a supplier of vibration motors, has announced that the company is expecting a major drop in their yearly revenue. The announcement comes just a day after Taiwan Semiconductor Manufacturing Co. (TSMC), a contract chipmaker, had reduced its revenue forecast for January-March quarter. Apple had also revised its first quarter earning guidance earlier this month.

According to a report in Nikkei Asian Review, Japan-based Nidec, whose vibration motors are present in all iPhone models, has reduced its full year profit outlook by over 25 percent. The company saw a mostly great 2018 until the tide shifted in November.

"We have faced extraordinary changes," said Shigenobu Nagamori, Chairman, Nidec, to the reporters at a press conference.

"Orders, sales and shipments in all business segments around the world saw major shifts," he added.

It will be the first time in six years that Nidec will see its yearly operating profit decline as well as the first drop in sales in nine years.

On Wednesday, TSMC, which is the sole supplier of chips for Apple's iPhone models, said that it expects a 22 percent drop in its revenue from January to March this year. The 22 percent drop is significantly higher than the roughly 13 percent decline the market was expecting. The company blamed the decline on “sudden drop in demand” for high-end phones. In addition to Apple, TSMC also supplies chips to Huawei's HiSilicon Technologies, Qualcomm, Nvidia, Broadcom, MediaTek, and AMD.

TSMC also stated that it is cutting its $11 billion capital spending plans for this year and implementing a hiring freeze.

Earlier this month, Apple announced it is reducing the revenue outlook for the first quarter of this year. The company is seeing weaker demand for new iPhone models in China and other markets. One analyst blamed this on the pricing of the new model and predicted that the Cupertino-based company will drop the price of iPhone XR in China in the coming months.

Meanwhile, a Bloomberg report on Wednesday indicated that Apple is planning hiring reductions in select divisions following the declining iPhone sales.

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