(Bloomberg) --

IQE Plc, touted by analysts as a supplier to Apple Inc., saw its shares lose a fifth of their value after warning that weakening smartphone-related demand will hit this year’s sales. 

The Cardiff, Wales-based company said that demand for Vertical Cavity Surface Emitting Lasers (VCSELs), which are used for 3D sensors and are thought to be included in the iPhone, is expected to “tail off” toward the end of the year, according to a statement Wednesday. Softening demand in the smartphone supply chain has also damped sales of its wireless epitaxial wafers.

“They’ve already been hit by smaller VCSEL chips being used for facial recognition in handsets,” Neil Campling, head of TMT research at Mirabaud Securities, said in written comments. “This incremental handset softness sounds like the supply chain is spilling over to demand issues and IQE, like STMicro, has exposure to iPhone 13 time-of-flight technology.”

Earlier in the day, China’s Xiaomi Corp. fell in Hong Kong trading after it said that smartphone demand is easing as it recorded its slowest pace of quarterly sales growth since early 2020 amid supply chain woes.

Shares of IQE fell as much as 21%, its biggest decline in two years and traded down 18% as of 10:09 a.m on London’s AIM market. That brings the drop this year to 44%.

IQE’s stock came under pressure in September after it issued disappointing guidance. The company is in the process of recruiting a new chief executive officer, with Peel Hunt analyst Damindu Jayaweera saying that a new leader could drive the changes needed to improve the company’s quality of earnings.

“The hope for an extra boost to mobile-related orders (both wireless and VCSEL) is unlikely until supply chains fully normalize,” Peel Hunt’s Jayaweera wrote in a note.

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