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Apple

Apple Suppliers Cut Forecasts Over ‘Extraordinary’ China Demand Shift

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Don Reisinger
Don Reisinger
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By
Don Reisinger
Don Reisinger
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January 18, 2019, 8:38 AM ET
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There are more signs of trouble ahead for Apple in China.

Taiwan Semiconductor (TSMC) and Nidec, two of Apple’s top and most important suppliers, cut their 2019 forecasts this week, citing “extraordinary” declines in Chinese consumer demand. According to the Nikkei, TSMC anticipates a year-over-year revenue drop of 22% compared to the same period in 2018. Nidec has cut its anticipated profit by 25%, according to the report.

Neither TSMC nor Nidec mentioned Apple or any other customer by name, but TSMC CEO C.C. Wei said that the company had witnessed a “sudden drop in demand” for higher-end smartphones. Nidec chairman Shigenobu Nagamori said that his company’s bearish outlook on 2019 was largely based on the “big slumps in November and December” it was forced to withstand.

TSMC is arguably the biggest cause for concern in Apple’s universe. The company is the only supplier for the processors Apple bundles inside its iPhones. While TSMC has several other customers across a variety of industries, Apple is unarguably one of its most important. Nidec supplies the vibration motor inside the iPhone.

The suppliers’ comments come just weeks after Apple announced that it had to cut its fiscal first quarter guidance by $5 billion due to unexpectedly lower demand for iPhones in China. Apple also signaled that troubles there could persist and said that it was embarking on new strategies, including making it easier for people to trade in old handsets, to offset some of those declines.

Both Apple and its suppliers also cited the ongoing trade dispute between the U.S. and China as increasingly troublesome. TSMC CFO Lora Ho was especially concerned with the dispute, saying that it “causes a lot of uncertainties, which is a negative factor for demand and the business environment.”

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