Apple Inc.'s (APPL) main European suppliers fell sharply Tuesday after one of the key providers of its facial recognition chips, Austria's AMS AG (AMSSY) , posted weaker-than-expected first quarter sales and issue a disappointing near-term forecast.
AMS, which earns an estimated 35% of its revenue from chip sales to Apple, its biggest customer, said it expects sales for its fiscal second quarter to fall to between $220 million and $250 million, a figure which fell well shy of analysts' forecasts and followed a weaker-than-expected first quarter top line of $452.7 million. The softer outlook followed a similarly muted statement from South Korea's SK Hynix, the world's second-largest chipmaker, earlier in the Asia trading session and renews investor concern that the so-called "super cycle" in global semiconductor demand could be coming to an end thanks to waning smartphone demand.
"We are not able to discuss the specific customer," said Moritz Gmeiner, who heads AMS's investors relations. "But we are seeing significantly lower business from a large smartphones programme and that is having a strong impact on the consumer business and the company as a whole."
Swiss-listed AMS shares were fell 10.56% Tuesday, the most in more than 18 months, and were changing hands at Sfr85.52 by mid-morning in Zurich. Other European companies in Apple's supply chain were also under pressure, with German-listed Dialog Semiconductor Plc (DLGNF) falling 6.05% and STMicroelectronics (STM) marked 1.22% to the downside.
The moves followed a weak session for Asia's biggest chipmakers, including SK Hynix (HXSCL) , which closed 2.73% lower in Seoul after cautioning investors that second quarter sales would slow thanks to a slowdown in smartphone shipments. The warning echoed similar concerns last week from rival Taiwan Semiconductor Manufacturing Company Limited TSMC, which has fallen more than 10% over the past week after it guided investors to a softer-than-expected second quarter top line owing to "weak demand from our mobile sector".
"Over the past six years, the enormous global demand for smartphones has changed the export and growth performance of several Asian countries through complex and evolving supply chains that involve several countries in the region," the International Monetary Fund said last week as part of its World Economic Outlook report. "Global sales of smartphones may have plateaued in late 2015."
"By decomposing the cycle from trend for Chinese exports of smartphones, regression results show that the trend is nonlinear and may have reached its peak in September 2015, suggesting that future global demand for smartphones may grow more slowly (driven more by replacement demand than new acquisitions)." the IMF said.
The collective concern has investors wondering how Apple will respond, both in its fiscal first quarter earnings, which are due on May 1, and its plans for iPhone X price changes amid increasing speculation that shipments have fallen short of expectations thanks to its $999 cost.
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Action Alerts PLUS holding Apple shares rose 0.42% in the opening minutes of trading in New York Tuesday to change hands at 165.94 each a move that trimmed the stock's year-to-date decline to 1.6% compared to a 12.75% gain for the NYSE FANG+ Index, an equal weight benchmark which tracks the moves of ten of the biggest and most active tech stocks in the world.