Apple shares take hit as iPhone chipmaker TSMC forecasts $1B dip in revenue

Posted:
in AAPL Investors edited April 2018
Apple's share price dropped about three percent during pre-market trading going into Thursday on word that TSMC -- the manufacturer of A-series processors for iPhones and iPads -- is expecting about $1 billion less revenue for the second quarter than Wall Street forecasts.

The iPhone X and its core, the TSMC-produced A11 Bionic chip.
The iPhone X and its core, the TSMC-produced A11 Bionic chip.


TSMC's guidance for the quarter is between $7.8 billion and $7.9 billion, versus Street consensus of $8.8 billion. "Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining," said CFO Lora Ho in a statement seen by CNBC.

Ahead of trading opening on the NASDAQ, Apple shares fell below $175, their lowest value since Apr. 13, when shares closed at $174.73.

TSMC specifically blamed its forecast on "softening" demand for high-end smartphones, as well as conservative estimates for cryptocurrency demand. A Morgan Stanley analyst, Charlie Chan, argued that some key factors were unconfirmed order cuts for the A11 Bionic processor in the iPhone X, and "around a month's delay of Apple's new 7 nm processor to July."

Apple is a major TSMC client, especially since the former has generally abandoned Samsung as a source of A-series chips. Any change in iPhone orders can deal a blow to TSMC's finances.

Conflicting reports have emerged about whether or not Apple has encountered lower demand for the iPhone X than expected. While assembly partner Foxconn posted strong December-quarter results, and Cowen and Company has said that production figures are in line, other reports have claimed order cuts and/or that the public has had trouble swallowing the phone's $999 price.

Speculation has pointed to Apple making this fall's follow-up to the X slightly cheaper, perhaps $899. KGI analyst Ming-Chi Kuo has suggested that a new 6.1-inch LCD iPhone -- shipping alongside 5.8-inch and 6.5-inch OLED models -- could start at just $550.

Comments

  • Reply 1 of 18
    fallenjtfallenjt Posts: 3,979member
    Apple stock is so sensitive to any news. It’s a zigzag. Google is more stable over times...I predict AAPL could dip as low as $140ish this year...
  • Reply 2 of 18
    avon b7avon b7 Posts: 4,070member
    In December 2017 AI reported on suggestions that only Apple and Samsung might be able to push on with 7nm process chips for 2018 phones.

    https://appleinsider.com/articles/17/12/13/apple-samsung-could-be-only-smartphone-makers-with-7nm-chips-in-2018

    In that thread I mentioned this:

    "Samsung, Globalfoundries and Intel are all trying to woo HiSilicon to be that second supplier. Rumours say Samsung is throwing OLED and other IP into the offer to sweeten the deal. The Kirin 980 is apparently very near finished"

    Huawei (HiSilicon) would appear to be almost officially in the 7nm group now according to this piece:

    http://playfuldroid.com/huawei-mate-20-fueled-by-kirin-980-scores-350000-on-antutu/

    HiSilicon was looking to increase capacity and after releasing its 2017 numbers, unit sales showed a very healthy YoY increase.

    So I doubt there has been any downward change at TSMC from HiSilicon orders unless someone has poached all their business (Samsung was trying hard, it seems).
    edited April 2018
  • Reply 3 of 18
    Ah, earnings season again, and WS is all out in droves with their dunce hats.

    Nothing to see here. Move along.
    edited April 2018 cornchipSpamSandwichStrangeDayswatto_cobra
  • Reply 4 of 18
    fallenjt said:
    Apple stock is so sensitive to any news. It’s a zigzag. Google is more stable over times...I predict AAPL could dip as low as $140ish this year...
    If it happens -- I pray that it happens -- I'll ignore my own diversification rule and stock up (no pun intended) like crazy.

    One can only dream...
    watto_cobra
  • Reply 5 of 18
    MacProMacPro Posts: 18,359member
    fallenjt said:
    Apple stock is so sensitive to any news. It’s a zigzag. Google is more stable over times...I predict AAPL could dip as low as $140ish this year...
    If it does I will buy another few 100k's worth immediately!
    cornchipwatto_cobra
  • Reply 6 of 18
    MacProMacPro Posts: 18,359member
    Is there another possible reason for this news e.g. a second source we don't know about?
    edited April 2018 watto_cobra
  • Reply 7 of 18
    I hope Apple is buying back more shares on this news. That's the only positive thing I can see coming out of this news. Apple stock doesn't seem to have any strength at all. AAPL loses in a day what it takes to gain for an entire week. Meanwhile, the FANG stocks are just chugging along without a care in the world. Amazon and Netflix have only tailwinds behind them. Apple has all that money to spend and yet is unable to find anything they can use as a tailwind. It's a darn shame.
  • Reply 8 of 18
    I hope Apple is buying back more shares on this news. That's the only positive thing I can see coming out of this news. Apple stock doesn't seem to have any strength at all. AAPL loses in a day what it takes to gain for an entire week. Meanwhile, the FANG stocks are just chugging along without a care in the world. Amazon and Netflix have only tailwinds behind them. Apple has all that money to spend and yet is unable to find anything they can use as a tailwind. It's a darn shame.
    If you think that's the case, you should be buying FANG?
  • Reply 9 of 18
    tzeshantzeshan Posts: 1,996member
    How about Qualcomm reducing orders to TSM because its client ZTE was banned by FTC from getting chips from Qualcomm and two other US chip makers? 
    blastdoorwatto_cobra
  • Reply 10 of 18

    A Morgan Stanley analyst, Charlie Chan, argued that some key factors were unconfirmed order cuts for the A11 Bionic processor in the iPhone X, and "around a month's delay of Apple's new 7 nm processor to July."
    Everything old is new again...



    https://www.youtube.com/watch?v=3BuC_Gel1KI
    cincyteeartdentwatto_cobra
  • Reply 11 of 18
    I hope Apple is buying back more shares on this news. That's the only positive thing I can see coming out of this news. Apple stock doesn't seem to have any strength at all. AAPL loses in a day what it takes to gain for an entire week. Meanwhile, the FANG stocks are just chugging along without a care in the world. Amazon and Netflix have only tailwinds behind them. Apple has all that money to spend and yet is unable to find anything they can use as a tailwind. It's a darn shame.
    If you think that's the case, you should be buying FANG?
    Nope. The FANG stocks are too expensive for me and mainly suitable for the wealthy hedge fund investors. I'm a retired, long-term Apple shareholder since 2004 and Apple product user since 1984. I'm not going anywhere. I'm just pointing out how it is. There's always been a general consensus of how Apple is under-appreciated especially when based on free cash flow and accumulated cash. I'm not saying anything that hasn't been said many times over.
  • Reply 12 of 18
    SpamSandwichSpamSandwich Posts: 31,334member
    But AAPL dropped yesterday apropos of nothing. I’d remain cautious about assigning definitive reasons for stock movement.
  • Reply 13 of 18
    blastdoorblastdoor Posts: 1,945member
    If it's just because of 7nm being pushed into July, then this is just a matter of shifting revenue/profit from one quarter to another and will amount to nothing. 

    If it's due to the iPhone 8 being more popular than the iPhone X, then that's unambiguously bad for TSMC's revenue, but it's harder to interpret what that means for Apple. 
    watto_cobra
  • Reply 14 of 18
    fh-acefh-ace Posts: 45member
    Blastdoor, Not sure why it would matter which is more popular since iPhone 8, 8plus and X all use the same processor.
    watto_cobra
  • Reply 15 of 18
    FolioFolio Posts: 600member
    fallenjt said:
    Apple stock is so sensitive to any news. It’s a zigzag. Google is more stable over times...I predict AAPL could dip as low as $140ish this year...
    If it happens -- I pray that it happens -- I'll ignore my own diversification rule and stock up (no pun intended) like crazy.

    One can only dream...
    Excerpt below from latest report from BAML today. Analyst Mohan kept price target at $220, if fulfilled you'd do pretty well. (My italics at end):

    CQ2 iPhone units could see some downside

    Overnight, TSMC guided down CQ2, pointing to weakness in high-end smartphones. We are already modeling below-consensus units for Q2, at 40mn units vs. the Street at 42- 43mn units for the June quarter, which we had lowered after our Asia trip last month. Given TSM’s guidance, we could see some additional downside to iPhone units of up to 5mn units for Q2, based on channel inventory dynamics.

    Shipments likely higher than builds

    Although CQ2 builds are ticking down, the sell-in is likely to be higher. Q2 normally faces the challenge of late-in-cycle iPhones released in the prior year when the upcoming launches in September start to detract from sales. The weaker traction of the iPhone X in CQ1 likely was further magnified in CQ2, causing further order cuts.

    Potential impact to estimates

    A 5mn shortfall in iPhones would likely lead to incremental pressure of ~$3.5bn in revenue (we are already at $50.4bn for the June Q, vs. the Street at $52bn), and EPS could see incremental pressure of $0.20 (We are at $2.06 vs. the Street at $2.15). Buybacks could be a small potential offset for 2Q (based on the magnitude completed in 1Q).

    iPhone weakness understood, magnitude could be higher

    In our opinion, investors are already expecting a weaker CQ2, but the magnitude could be surprising to some. We expect the shares to face some pressure heading into earnings, however, we view the long-term story as increasingly decoupled from iPhone cycles, morphing to one of capital return, services upside and stable hardware. We reiterate our Buy rating

  • Reply 16 of 18
    blastdoorblastdoor Posts: 1,945member
    fh-ace said:
    Blastdoor, Not sure why it would matter which is more popular since iPhone 8, 8plus and X all use the same processor.
    Doh! You’re right. I must have drain bammage today 
    watto_cobra
  • Reply 17 of 18
    waltgwaltg Posts: 90member
    Apple the company that Wall Street loves to hate....
    StrangeDayswatto_cobra
  • Reply 18 of 18
    avon b7avon b7 Posts: 4,070member
    Following on from what I posted earlier, I just saw this:

    https://www.gizmochina.com/2018/04/07/huawei-kirin-980-mass-production-begins-this-quarter-to-use-tsmcs-7nm-process/

    It looks like Huawei's plans haven't changed so I doubt any possible drop in revenues at TSMC is due to HiSilicon orders.

    TSMC is also manufacturing Kirin 970s which will almost definitely see an increase in production over the next couple of months due to more new phones carrying it.

    Insofar as smartphone SoCs, I suppose that leaves Apple and Samsung as the only candidates for the drop in revenues if the 980 rumour is true.
    muthuk_vanalingam
Sign In or Register to comment.