Qorvo joins other Apple suppliers in cutting forecast

Dwayne Harmon
November 15, 2018

"It is hard to give Hon Hai a positive rating", said Arthur Liao, an analyst at Fubon Securities, who characterised the result as neutral with most investors concerned about the outlook.

Shares of the tech giant slid as much as 5 percent Monday on a profit warning from a parts supplier for the company's new iPhone XR - a new, lower-priced model that has been positioned to drive big sales.

A man holds two boxes for the Apple's new iPhone X which went on sale today, at the Apple Store in Regents Street in London, Britain, November 3, 2017.

Kuo has reduced "his overall iPhone shipment forecasts by 15-20 percent for the first quarter of 2019", notes the report.

Apple's iPhone XR, which boasts the iPhone X's edge-to-edge display, albeit using older LCD pixels instead of the X's high-resolution OLED screen, was widely expected to fuel a massive wave of upgrades from users of the iPhone 6S or earlier models. In a new investor note obtained by MacRumors, Kuo lowered his estimate for iPhone XR sales by upwards of 20% for the current holiday quarter.

However, the iPhone XR doesn't seem to be doing too well right now. And on Monday, Apple shares dropped after Lumentum - a supplier of "laser diodes for 3D sensing", such as those used by Apple's Face ID - cut its revenue forecast after "one of our largest Industrial and Consumer customers" significantly reduced orders. Hon Hai joins a string of Apple suppliers that have warned of a worsening outlook as iPhone volumes plateau alongside a lethargic smartphone market.

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The slide may also reflect concerns that Apple knows that iPhone unit sales are going to go negative in the short-term, which is why it chose to stop reporting unit sales.

"Over the past 10 years, Apple's iPhone ASP has increased a dramatic $220, or 40%, reflecting its growing value to both consumer and business markets, but almost HALF of all that just came in FY18 alone, making a period of digestion now likely".

These data points come as fears emerge that there is weak demand for Apple's products in emerging markets, including China, partly driven by a strong dollar making iPhones more expensive.

In the fourth quarter, Apple sold 46.9 million iPhones, missing analyst expectations of 47.5 million iPhones, according to FactSet. "The Apple investment paradigm is moving away from a focus on device sales toward a more predictable services-driven business".

Citi also cut its target on Qorvo on Monday due to iPhone XR weakness.

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