Suppliers slash 2019 forecasts as iPhone faces ‘extraordinary’ drop in Chinese demand

Chance Miller | Jan 17 2019 - 3:12 pm PT

Slowing iPhone sales are dragging down Apple suppliers in Asia. Nikkei reports today that Apple suppliers are drastically reducing their 2019 forecasts due to an “extraordinary” drop-off in Chinese smartphone demand.

Nikkei’s report comes on the heels of TSMC announcing this morning that it was forecasting its biggest quarterly revenue drop in a decade. Now, Nidec has announced that it has cut its full-year profit outlook by over 25 percent. Nidec is Apple’s supplier of a small but important part of the iPhone: the vibration motor.

Nidec chairman Shigenobu Nagamori told reporters today that the company has “faced extraordinary challenges” over the last several months. The executive added that “orders, sales, and shipments” in all of its business segments are down.

“We have faced extraordinary changes,” Nidec Chairman Shigenobu Nagamori told reporters at a Thursday news conference. The Kyoto Prefecture-based manufacturer performed strongly for the half through September, with net profit rising to new highs.

The tide shifted in November, however. “We saw big slumps in November and December,” Nagamori said. “Orders, sales and shipments in all business segments around the world saw major shifts,” he explained.

As for 2019, Bernstein Research analyst Mark Li said that he expects iPhone shipments to fall 13 percent from 2018. For TSMC specifically, Li sees growth of 0.5 percent in 2019, but a return to higher growth in 2020:

“We think the current major slowdown at TSMC is mainly due to lackluster iPhone sales, and we forecast that TSMC could only grow some 0.5% for all 2019, but would resume growth of around 9% for 2020,” Li said.

Earlier today, TSMC – the sole supplier for A-series chips used in Apple devices – revealed that it was forecasting its biggest quarterly revenue drop in a decade. The chipmaker attributed the slump to “a sudden drop in sales of high-end smartphones.”

Apple itself lowered holiday quarter guidance a few weeks ago, causing a string of suppliers to do the same. Just yesterday, a report suggested that Apple is also planning hiring reductions in light of slowing iPhone sales.