7 Companies Poisoned by Apple's Stock Slump
The iPhone 5 was the top-selling smartphone during Q4 2012 with 27.4 units, but as we roll further into 2013 the shine has definitely worn off. How do we know? Ask Apple's component suppliers, which are blaming weaker iPhone demand for their lackluster revenue forecasts. In fact, Reuters reports that the company has earned the nickname “Poison Apple” among its supply chain partners. It also doesn't help matters that Apple's stock price has fallen below $400 for the first time since 2011.
Here are seven big-name component suppliers that are feeling the pain from Apple’s slump.
LG, one of Apple’s primary display suppliers, posted first quarter profits that missed analysts’ expectations by a significant margin. During the three-month span that ended March 31, the company reported a net income of 3.49 billion won, which is way below the 76 billion won analysts previously predicted. Harrison Cho, analyst for Samsung Securities Co., told Bloomberg that LG may have to wait until Apple launches a new product to see “strong profits” again.
Hon Hai Precision Technology (Foxconn)
Hon Hai Precision Industry Co., a division of Foxconn responsible for assembling Apple’s iPhone and iPad, recently reported its biggest revenue drop in more than a decade. The China-based plant raked in $26.9 billion during the post-holiday season—representing a drop of 19 percent compared to the same quarter last year. Since Hon Hai depends on Apple for a large portion of its revenue, the sharp drop in profit seems to be a clear indicator iPhone demand may be slipping.
Apple microchip supplier Cirrus Logic saw a significant drop in its stock price last week—a slump that seems directly related to Apple. Cirrus Logic warned of a huge inventory write-down and said revenue for the current quarter would be weaker than expected, citing "a decreased forecast for a high-volume product" from a customer. According to The Wall Street Journal, Apple made up 82 percent of Cirrus Logic's sales during the first 9 months of the year. Prices decreased from $21.41 to $18.05 per share last week, and as a result Apple shares plummeted to $402.8 on the same day.
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Cirrus’ stock drop seemed to create a ripple effect, seeing as Qualcomm saw a decrease in stock shares immediately after the company announced its bad news. Qualcomm, which supplies Apple with wireless chips for its iPhone 5, saw its prices drop slightly by 0.92 percent per share. The company has since rebounded, but investors will be watching for the impact of Apple's results.
Broadcom, which supplies Apple’s touch screen controller chips, saw stock prices decrease by four percent following Apple’s stock drop. The company is scheduled to report its first quarter earnings for 2013 later today, which could provide some indication as to what iPhone demand has been like over the past few months. In addition to supplying chips for Apple's touch screens, Broadcom also produces the Wi-Fi and Bluetooth combination chip embedded in iPhones. After a brief dip earlier this week, Broadcom stock prices appear to be rebounding.
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SanDisk joins the legion of Apple suppliers that could be seeing ramifications from decreased iPhone demand. The company, which supplies Apple’s memory chips, said revenue will slow down in the first quarter of 2013, as shares slightly dropped by 4.8 percent to $53.07, according to CNBC.
Japan Display, another major display supplier for Apple’s iPhone 5, admitted that there was a “drastic cut” in orders during the last quarter of 2012, Reuters reported. The company is currently looking to boost sales by 60 percent by seeking business from smaller partners and decreasing its reliance on Apple. Last fiscal year, Japan Display's operating margins came in at below 1 percent, suggesting that iPhone demand may no longer be lucrative enough for the display maker.