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Apple supplier Pegatron says revenues hit by waning demand for iPad mini

post #1 of 35
Thread Starter 
Demand for Apple's iPad mini may be slackening, as a major component supplier for the small tablet has forecast a considerable drop in its revenue.

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Pegatron, which contracts with Apple for components that go into the iPad mini, iPhone 4S, and other products, forecast on Wednesday its largest consumer electronics revenue drop in six quarters. The component supplier predicted second quarter consumer electronics revenue 25 to 30 percent lower than the prior quarter. The only drop larger than Pegatron's forecast was a 37 percent decline in the fourth quarter of 2011, according to Bloomberg.

The iPad mini makes up more than half of what Pegatron brings in from consumer electronics, and the company's CEO Jason Cheng said that the iPad mini revenue dip was "more on demand, while price has been stable."

Pegatron's other major division is its computing unit, which expects to see a 5 to 10 percent increase in shipments by the end of the second quarter. The smaller communications hardware unit is forecast to see flat revenues for the quarter.

Pegatron is the latest in a line of Apple component suppliers that have cited softer demand of Apple's best selling products. Earlier this month, shielding and heat control supplier Laird said demand from its largest customer dropped 17 percent, and observers believe that the company's largest customer is Apple.

Word in April from energy and audio chip maker Cirrus Logic that iOS device demand was softening sent Apple shares tumbling below $400 for the first time since 2011. Apple soon after reported its first profit decline in a decade.

Also in April, Korean electronics giant LG, which supplies Apple with displays for its iPhone and iPad, cited "weakened" demand for those devices. LG, though, may be gearing up to produce Retina iPad mini panels as Apple is expected to refresh the diminutive tablet with a higher resolution screen in the near future.

Whether Pegatron's prediction bodes poorly for Apple or not remains to be seen. Apple CEO Tim Cook sought to dissuade from too much tea leaf reading when it comes to component suppliers.

"The supply chain is very complex," Cook said in January during the company's quarterly conference call, "and we obviously have multiple sources for things. Yields might vary, supplier performance might vary."
post #2 of 35

Supplier Fail

Apple Doom

post #3 of 35
Pegatron's waning revenue is not the same as waning demand for iPads.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #4 of 35
There has to be a wane in the old model before they start assembling the new model.

Assembly lines need to change, workers need to be trained, parts shipped in.
It's not a seamless transition from old to new.
post #5 of 35
Quote:
Originally Posted by SpamSandwich View Post

Pegatron's waning revenue is not the same as waning demand for iPads.

But it sounds good.  Apple products typically do well over the first 6 months before they start dropping in sales.  Then Apple starts to finish the next product, ramp up production, and then a new product announcement with more sales than the previous model.  Plus we're going into the Summer months and the summer months are typically low for the high tech sector. 

post #6 of 35
Quote:
Originally Posted by SpamSandwich View Post

Pegatron's waning revenue is not the same as waning demand for iPads.

Yeah, but close enough.

 

Has any Apple supplier reported an "increase" in demand, orders, revenues in the last six months?

post #7 of 35
Quote:
Originally Posted by Evilution View Post

There has to be a wane in the old model before they start assembling the new model.

Assembly lines need to change, workers need to be trained, parts shipped in.
It's not a seamless transition from old to new.

 

That's not necessarily true.  Support demand were completely stable and, as you say, assembly lines have to change, etc.  Then I would expect suppliers (of parts consumed by the assembly line) would see a surge in orders.  Just as an example, with numbers I'm making up.  Suppose Apple sells and assembles 10 million iPad minis a month, and it's going to take 1 month to transistion.  Then then need to make more than 10 million for a few months before the assembly line starts cranking out Mini2s.  So Pegatron (the winged robotic horse from Greek mythology) would be asked for more widgets for those months.

post #8 of 35
Could just mean Apple is relying more on suppliers that don't talk too much.
post #9 of 35
apple needs to be pushing out new products now to keep things fresh. the fall is too long to wait for them to maintain and grow market share. i say this as a long time share holder and supporter. android has caught up, and ecosystem stickiness will only keep things going for so long.
post #10 of 35
Has anyone looked into the whether Apple is changing suppliers?
post #11 of 35

It may not be waning demand for iPad Mini.

 

More than likely, it is simply waning demand for Pegatron's particular component as apple revamps the Mini.

 

Let's keep it real, Pegatron.

 

LOL

post #12 of 35
Quote:
Originally Posted by 9secondko View Post

It may not be waning demand for iPad Mini.

 

More than likely, it is simply waning demand for Pegatron's particular component as apple revamps the Mini.

 

Let's keep it real, Pegatron.

 

LOL

That is a great point! Is Pegatron a supplier for the new iPad Mini to be relased...well soon anyway?

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post #13 of 35
WS: Stock up 20% over the last two weeks. Quick we need a negative report.
post #14 of 35
Quote:
Originally Posted by isaidso View Post

Yeah, but close enough.

 

Has any Apple supplier reported an "increase" in demand, orders, revenues in the last six months?


Yes. When new iPads were introduced in Q1 of the calendar year, the preceding Xmas season would be a boom quarter for everyone.

 

But this really shows comparing the four quarters of a year is stupid. Seasonal demand is as much a factor as impending product upgrade.

post #15 of 35
Less demand can mean many things, which have been mentioned. I believe Apple is trying to create more components in-house. This would help the company become more self reliant and increase its margins.
post #16 of 35
Quote:
Originally Posted by MacAttack99 View Post

Less demand can mean many things, which have been mentioned. I believe Apple is trying to create more components in-house. This would help the company become more self reliant and increase its margins.
 

They might be getting more suppliers involved as well.....so orders from Pegatron might be less.

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post #17 of 35

I tell people this all the time. At Apple just because a supplier exist in the current product offering it does not mean they automatically show up in the next product. From time to time as Apple product evolve they move to different suppliers as a matter of course. One day you are in and the next day you are out. Apple has very little loyalty to any of its suppliers. Wall Street know this and the reason why when a supplier has lots of Apple's business Wall Street it not impressed and thus do not recommend investing in the suppliers of Apple,

 

This is like the 2nd or 3rd announcement like this and Apple stock keeps going up, 2 months ago this same news would have driven the stock down. Wall Street is now ignoring this all as they know it does not mean a thing.

post #18 of 35

There isn't a real comparison to be made or gauge how iPad mini demand is. It wasn't around this time last year (which is more important than quarter over quarter) and the previous quarter was the holiday quarter, so of course sales are going to dip. And if I remember correctly Apple under-produced the mini not sure how well it would sell, then had to really ramp up production during the holiday quarter to meet demand.

Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #19 of 35
Quote:
Originally Posted by isaidso View Post

Yeah, but close enough.

 

Has any Apple supplier reported an "increase" in demand, orders, revenues in the last six months?

 

There was a report that Foxconn was hiring 5000 new factory workers presumably for new Apple products a couple months ago. Nobody paid it much attention, because it's not as sexy as the "Apple is doomed" meme currently popular in tech press.

post #20 of 35
Quote:
Originally Posted by jungmark View Post

WS: Stock up 20% over the last two weeks. Quick we need a negative report.
Yep. Did Pegatron even say what the headline suggests? Seems to me once again the media coming to conclusions based on circumstantial evidence. I mean how many times this year have we seen these reports of massive drop offs in demand if Apple products. And yet they haven't shown up in sales figures reported by Apple. They reported record iPad sales of 19M last quarter. Are we really supposed to believe people have all of a sudden stopped buying iPads?
post #21 of 35

Granted, this is a rumor site not a factual site.  Granted, this story might be true. 

 

But if it isn't true... if iPad Minis are still selling okay... then I say respectfully but with all my heart... 

 

**** you Pegatron for saying this and **** you AI for publishing it.

 

And if it is true, then **** me for posting like a ****.

 

Lol

post #22 of 35
Well Apple did provide horrible guidance for this quarter. I think wall street already baked that into the price. The guidance implies lower sales than previous quarter and last year quarter.
post #23 of 35
Apple forecast X devices to be put into the sales channel.

Suppliers delivers X > Forecast is accurate, no need to add new orders.

Supplier reports no new revenue.

Apple finds new supplier for retina iPad mini screens (LG) > orders diverted.

Pegatron story inflated way beyond context.

Apple share price takes a hit > analysts to make their profits.
post #24 of 35
Quote:
Originally Posted by herbapou View Post

Well Apple did provide horrible guidance for this quarter. I think wall street already baked that into the price. The guidance implies lower sales than previous quarter and last year quarter.

 

"Horrible guidance"…? Please… 

 

More like, "A slight decrease in revenue/margins in a demonstrably weaker market" (and yet, Apple is still guiding well above most of the consumer electronics industry), while transitioning into new products and updates in the Fall… 3rd quarter is typically Apple's weakest for all of the above reasons.

 

Let's not make mountains out of molehills by calling a minor decrease "horrible"...

post #25 of 35

I think this is another case of a single supplier report being taken as a market-wide bellwether. Big mistake...

 

I think it is more likely that Apple is shifting manufacturing responsibility elsewhere (e.g for iPad Mini Retina?) and downsizing the v01 production accordingly. This not only keeps second source supply chains healthy, but keeps the "analysts" and competitors from scoping out Apple's plans via "supplier intel".

 

Pegatron isn't that likely to step up and freely push out reports like these anyway, not without some compelling reason. Making such open declarations could damage relations with Apple pretty badly. So I think it could could just as easily be market mis-information designed to throw the competition/analysts off the scent. 

 

We'll see what happens. One thing we do know already, is that Apple expects to sell a bit less this quarter than last, and that they are prepping new products/upgrades for the fall and beyond. So changes in Pegatron production schedules are pretty much a given anyway? 

post #26 of 35
OR:

"Apple supplier Pegatron boosts China workforce by 40 percent in second quarter"

http://m.yahoo.com/w/legobpengine/finance/news/apple-supplier-pegatron-boosts-china-034023570.html?.intl=us&.lang=en-us
post #27 of 35
I think it is a given that demand for iPads will drop off. There is a limit to how many devices people will update on a regular basis. For some updating is a priority and will do it no matter what, but for a lot of people, there are other financial priorities. There are five in my family and we now have 5 smart phones and 5 tablets. The smart phones get updated on a two year cycle but we get them as part of our contract. The tablets are wifi only and were bought up front. They will be run into the ground, only being replaced when they can not do what we want them to do. The oldest, an iPad, is nearly 3 years old now and does everything it is supposed to do. I would imagine we would get at least another 3 years out of it, if not more. Most people do not update their computer every two years (my oldest computer is now 8 years old). I assume most will treat tablets the same. In developing economies there is less incentive to buy a tablet in the short term. In these markets smart phones are just taking off. Top of the line tablets are unlikely to follow for a few years.
post #28 of 35
Just more miss-information & hearsay.
post #29 of 35
Quote:
Originally Posted by schlack View Post

apple needs to be pushing out new products now to keep things fresh. the fall is too long to wait for them to maintain and grow market share. i say this as a long time share holder and supporter. android has caught up, and ecosystem stickiness will only keep things going for so long.

 

...apart from selling tens of millions of high end devices and taking the lions share of real cash money profits every quarter that is.

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post #30 of 35
AAPL still drops even when ipad mini was first out and selling like hot cakes . I don't care its so-called revenue drop .
People say AAPL will rocket when ipad mini came , now what !!! AAPL dived like hell !!
post #31 of 35

About that Bloomberg report of 'falling iPad mini demand'

 

http://tech.fortune.cnn.com/2013/05/09/apple-ipad-mini-pegatron-bloomberg/

post #32 of 35
Quote:
Originally Posted by piot View Post

About that Bloomberg report of 'falling iPad mini demand'

http://tech.fortune.cnn.com/2013/05/09/apple-ipad-mini-pegatron-bloomberg/

Thanks for the link. Very interesting. Now it's time for "Get the Reporter."
post #33 of 35
Quote:
Originally Posted by tribalogical View Post

 

"Horrible guidance"…? Please… 

 

More like, "A slight decrease in revenue/margins in a demonstrably weaker market" (and yet, Apple is still guiding well above most of the consumer electronics industry), while transitioning into new products and updates in the Fall… 3rd quarter is typically Apple's weakest for all of the above reasons.

 

Let's not make mountains out of molehills by calling a minor decrease "horrible"...

 

Its depends on someone's point of view.  To me its more like YoY and Q2Q declines in booming tablet and smartphone markets. Its horrible to me because last year Apple was dealing with Q2Q decline (normal) but still was doing double digit YoY growth. I am kind of hoping Apple can maintain its YoY EPS at the minimum.

post #34 of 35
Quote:
Originally Posted by crazy_mac_lover View Post

AAPL still drops even when ipad mini was first out and selling like hot cakes . I don't care its so-called revenue drop .
People say AAPL will rocket when ipad mini came , now what !!! AAPL dived like hell !!

 

 

He says, as Apple gains 20% in value over two weeks….

post #35 of 35
Quote:
Originally Posted by herbapou View Post

 

Its depends on someone's point of view.  To me its more like YoY and Q2Q declines in booming tablet and smartphone markets. Its horrible to me because last year Apple was dealing with Q2Q decline (normal) but still was doing double digit YoY growth. I am kind of hoping Apple can maintain its YoY EPS at the minimum.

 

That's just being "fearful". Being fearful doesn't make a "horrible report" from something that simply isn't horrible.

 

If Apple was operating in the red and forecasting increased losses, THAT would be "horrible" (you could reasonably call RIM or Nokia's positions and forecasts "horrible", but Apple's?). However, Apple today is so far removed from a scenario that any rational person would refer to as "horrible" that I had to comment. It isn't about a point of view, it's about rational, practical reality without hype or hysteria...

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