Categories Consumer, Technology, U.S. Markets News

Chip stocks slip after Apple supplier predicts weaker smartphone demand

Adding to the concerns that the smartphone boom is finally leveling off, component suppliers are witnessing a marked decline in demand. The deepening slowdown, evidenced by the recent slump in the sales of iPhone, has started affecting the suppliers including microprocessor manufacturers.

Most of the leading chipmakers suffered Thursday after Taiwan Semiconductor Manufacturing Company (TSM) released dismal guidance for the current quarter and fiscal 2019 while reporting its fourth-quarter results. TSMC shares lost about 3% in the premarket, despite the quarterly results beating estimates. The ripple effect of the below-consensus guidance issued by the company, which is the largest contract chipmaker and a leading supplier of smartphone components to US companies, was visible in the performance of the other semiconductor stocks.

Intel (INTC) extended the recent downturn and traded slightly lower in the early trading hours, and the case of Advanced Micro Devices (AMD) was no different. After closing the last session lower, Nvidia (NVDA) remained in the negative territory as the session progressed. Qualcomm (QCOM) and Micron (MU) also suffered modest losses.

The ripple effect of TSMC’s week guidance was visible in the performance of the other semiconductor stocks

TSMC said it is currently looking for first-quarter revenues of $7.3-$7.4 billion, indicating the weakest annual growth in more than a decade and a sharp decline from the preceding year. The revenue growth for 2019 is forecast between 1% and 3%, nearly half of the growth rate registered a year earlier. The company reported a 1% increase in earnings for the fourth quarter and a 2% growth in revenues to $9.40 billion, which were in line with estimates.

The Asian tech company, which is the sole supplier of smartphone chips to Apple, attributed the unimpressive outlook to the faltering sales of high-end phones globally, causing an inventory imbalance. The company predicted that smartphone sales might not recover until the second half when new models are expected to hit the market, and cut its capital spending target sharply to about $10 billion.

Apple is introducing three new iPhones but is that enough?

The latest projection is broadly in line with the downward revision of iPhone sales by Apple. The tech giant had also slashed its production target for the first quarter by about 10% after the latest iPhone models received a lackluster response. The faltering demand, coupled with the impact of the US-China trade war, is expected to weigh down on Apple’s revenues in the coming quarters.

Earlier, Samsung Electronics had reduced its production goals, concerned about the unfavorable market conditions and their effect on smartphone manufacturers and semiconductor companies.


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