Apple parts supplier Nidec cuts 2019 sales forecast citing 'extraordinary' contraction in ...

AppleInsider

Nidec, a Japanese company that supplies vibratory motor parts for products like Apple's iPhone, is revising down 2019 sales forecasts due to what its chairman characterizes as an "extraordinary" decline in Chinese demand.

Apple's Taptic Engine in iPhone XR. | Source: iFixit

Citing the Chinese sales slowdown, exacerbated by a simmering trade war between the U.S. and China, the parts supplier on Thursday cut full-year profit estimates by more than 25 percent, reports Nikkei.

"We have faced extraordinary changes," Nidec Chairman Shigenobu Nagamori said during a press conference, hinting at sluggish Chinese demand.

Beyond parts for iPhone, presumably components used in Apple's Taptic Engine, Nidec saw a slowdown in China for motors used in the automotive and home appliance industries. Unlike other Apple suppliers, the health of the Japanese company is not intrinsically tied to the success of iPhone.

It appears, however, that a significant share of Nidec's troubles stems from Apple's recent iPhone miss.

"We saw big slumps in November and December," Nagamori said.

In early January, Apple lowered quarterly guidance for the first fiscal quarter of 2019 due to weak iPhone sales. Apple CEO Tim Cook in a note to investors blamed the revenue shortfall in large part on an unexpected sales slowdown in China over the three month period ending in December.

Nidec is the latest Apple supplier to cut its earning outlook for the coming year. Prior to Apple's announced adjustment, manufacturers AMS, Japan Display, Lumentum, Qurvo and others reduced earnings forecasts, signaling what would become a confirmed drop in demand for iPhone.

Most recently, A-series chip manufacturer TSMC on Thursday slashed its guidance on the back of sluggish iPhone sales and a contraction of the wider smartphone market. According to Nikkei, TSMC CFO Lora Ho reveled the company has implemented a hiring freeze and cost control measures to cope with the market changes.

EsquireCats

Rather this is more evidence that the problem isn't limited to iPhone, since iPhone orders, while significant, aren't representative of the figure declines in question. (Especially when considering that Apple has longer term and multiyear orders with these companies.)

Secondly major Android handset manufacturers, such as Samsung, have significantly revised profit forecasts for the quarter. Notably with LG forecasting a 80% decline in their profit for the quarter.

genovelle

EsquireCats said:

Rather this is more evidence that the problem isn't limited to iPhone, since iPhone orders, while significant, aren't representative of the figure declines in question. (Especially when considering that Apple has longer term and multiyear orders with these companies.)

Secondly major Android handset manufacturers, such as Samsung, have significantly revised profit forecasts for the quarter. Notably with LG forecasting a 80% decline in their profit for the quarter.

True. There is a difference in a cut in expected profit and a cut in expected revenue. If they anticipate lower volume each part becomes more expensive to make as the overhead and labor become a larger percentage of each part

lenn

Cook and the gang's strategy of high margins/prices is failing in China. Unlike in the U.S. Apple has competition from Chinese companies with very good products that the US government has banned from selling in the US not because of some made up national security fake news but because of the stiff competition it would give Apple. Then Apple would be forced to lower it's prices here in the US which is something Cook is fighting with every thing he has to make sure doesn't happen. I'm guessing that's what all those meetings Cook had with Trump are about the last 2 years. Not the fake privacy BS.

22july2013

The stock market in China dropped 30% in 2018. People there are hurting financially, as ultimately stocks in China are owned by the people. So iPhone sales will suffer there. The government of China has been urging its own people to invest in their weak stock market. It may even be part of their scoring system in the new social credit grading system. The people won't be happy. Don't forget the role the falling soviet economy had in the rise of Yeltsin in 1991.

evilution

The 25% decline is probably mostly Android phones.
The fact that this company happen to also make parts for Apple is the only reason this even became a story.

Or it could be another one of those “Apple is doomed because they ordered less parts”, not realising that Apple just redesigned it and is now getting it from a different company.

tbornot

What it shows is the stunning success of the Trump administration to get the Chinese Emperor to come to Washington to discuss trade.  Until now, Americans went to Beijing hat in hand.

gatorguy

evilution said:

The 25% decline is probably mostly Android phones.
The fact that this company happen to also make parts for Apple is the only reason this even became a story.

Or it could be another one of those “Apple is doomed because they ordered less parts”, not realising that Apple just redesigned it and is now getting it from a different company.

Which Android OEM's are using Nidec's taptics?

carnegie

To be clear, Nidec only revised its revenue guidance down by about 9% (around $1.4 billion). That's for its full fiscal year, but since the revision is compared to guidance offered in late October all of the revision reflects changed exceptions for the second half of its fiscal year (November through March). So that might mean something like 20% less revenue than had previously been expected over that time period.

That said, I don't think it's likely that most of that reduced expectation comes from Apple. Nidec produces a wide range of products, and the kinds of components which Apple would be buying from it account for a fairly small portion of its revenue.

For the first half of its fiscal year, "Other small precision motors" accounted for 128,852 million Yen (around $1.2 billion) out of the 777,604 million Yen in revenue that Nidec reported. That's 17% for the entire category. That category consists of "other small precision motors for optical disk drives, vibration mechanism for smartphone tactile feedback and silent mode features, electronic cooling fans, refrigerators, DVD recorders, laser printers, copiers, polygon scanners, automobiles and other applications." (Emphasis added.) So not all of that 17% is from the kind of components which Apple would be buying from Nidec. Would Apple account for 3, 6, or 10% of Nidec's revenue? I don't know, but it's something in that range rather than 20 or 50%.