Top Apple Suppliers Post Solid Sales as iPhone Concerns Persist

Debby Wu, Bloomberg News

A box of the Apple Inc. iPhone XS sits at an Apple store during its launch in Hong Kong, China, on Friday, Sept. 21, 2018. The iPhone XS is up to $200 more expensive than last year's already pricey iPhone X and represents one of the smallest advances in the product line's history. But that means little to the Apple faithful or those seeking to upgrade their older iPhone. , Bloomberg

(Bloomberg) -- Apple Inc.’s two largest Asian suppliers unveiled decent jumps in monthly revenue, potentially assuaging investors who fear the worst about iPhone demand.

Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co. both posted a 5.6 percent rise in November sales, a solid figure given Apple suppliers around the globe have taken turns to cut back on output or revenue outlooks to reflect waning demand for the U.S. company’s most important product.

While reflecting just 30 days of business, TSMC’s and Hon Hai’s performance comes in the middle of the year’s busiest quarter and may help balance the narrative that Apple’s latest line-up -- particularly the cheapest iPhone XR -- is falling flat with global consumers. Hon Hai’s November revenue of NT$601.4 billion ($19.5 billion) was a record for the month and takes January-November sales growth to almost 16 percent -- on track for its fastest pace of annual growth in years.

TSMC’s sales of NT$98.4 billion, while reflecting a pullback in growth from October, may underscore its rare position of being the sole processor chipmaker for Apple’s most expensive gadgets. TSMC and Hon Hai climbed more than 1 percent in Taipei.

From Lumentum Holdings Inc. to Cirrus Logic Inc. and Qorvo Inc., a clutch of Apple’s suppliers have cut or underperformed on their outlooks in recent months, stoking concerns about the iPhone’s prospects as competition intensifies and consumers take longer to upgrade their devices. TSMC, which is grappling also with a stalling crypto-mining market, had itself disappointed investors with a less-than-expected revenue forecast for the December quarter. That lukewarm forecast however may reflect uncertainty around growing U.S.-Chinese trade tensions, analysts said at the time.

Apple accounts for close to half of main iPhone-assembler Hon Hai’s revenue and about a fifth of TSMC’s, according to data compiled by Bloomberg. Executives at the chipmaker -- a bellwether for the industry as well as an early barometer of iPhone demand -- have said they expect demand for premium devices to help offset crypto-sector lethargy in the second half. Its high-performance computing, automotive and Internet of Things segments should still expand by double-digits during that time as everyday objects become increasingly connected, executives have said.

For Hon Hai however, the more pertinent issue may be its wafer-thin margins -- Apple is expected to apply more pressure on its manufacturing partners should volumes decline. Last week, Morgan Stanley estimated iPhone unit sales will fall 8 percent to 200 million in the current fiscal year, while slashing its target on the American company’s stock to $236 from $253.

“Apple’s iPhone weakness is a long-term issue for the Asia supply chain, including Taiwanese suppliers, and we feel that iPhone shipments have peaked,” Fubon Securities’s Arthur Liao said in a Nov. 14 note.

To contact the reporter on this story: Debby Wu in Taipei at dwu278@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Samson Ellis