Apple Inc. iPhone X smartphones are displayed during the sales launch at a store (Photographer: Michael Short/Bloomberg)

Apple Supplier AMS's Outlook Spurs Fears of Weak iPhone X Demand

(Bloomberg) -- Apple Inc. supplier AMS AG shares tumbled after cautioning on negative operating margins, yet another semiconductor company to spark warnings from analysts of shaky demand for the iPhone X.

The poor short-term guidance given by Austrian-based AMS late Monday was heavily impacted by lower iPhone X volumes, Baader Helvea AG analyst Guenther Hollfelder said in a note.

Shares in AMS fell as much as 14 percent to 82.44 Swiss francs Tuesday in Zurich, where the stock is listed. The stock has increased 8.1 percent so far this year, as of the end of trading Monday. The company expects second-quarter revenue of $220 million to 250 million, up 10 to 25 percent year-on-year and below estimates of 304.9 million euros ($372 million), according to data compiled by Bloomberg.

AMS produces optical sensors for mobile phones, which manage color, brightness, and whether the handset is being held against the ear, and has recently expanded into 3-D sensors. Its second-quarter sales guidance “corresponds with about 20-25 million less iPhone X units based on our calculations,” Hollfelder said.

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Investors have been looking for clues regarding demand for the new iPhone X. Apple’s five largest device assemblers reported a sharp slowdown in monthly sales after peaking at the end of last year, suggesting demand for the high-end device may be fading.

Key suppliers such as Hai Precision Industry Co. and Pegatron Corp. reported a combined 8 percent rise in their total sales across the March quarter, but growth slowed sharply later in the period. Apple’s main chip supplier Taiwan Semiconductor Manufacturing Co. predicted current-quarter sales about $1 billion less than analysts had projected.

Shares in Apple, which is set to post quarterly results on May 1, have fallen just over 7 percent over the past three days. Analysts at Morgan Stanley cut their forecasts on Friday for iPhone shipments. The Philadelphia Semiconductor Index has also posted a 3-day loss of just under 7 percent.

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AMS’s first quarter adjusted earnings came in at $77.3 million, below estimates of $82.9 million. Adjusted operating margin in the second quarter is expected to be around negative 20 to 25 percent, compared to a positive 17 percent in the first quarter.

“This is all Apple, specifically iPhone X,” said Neil Campling, senior analyst at Mirabaud Securities Ltd.

©2018 Bloomberg L.P.

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