Disappointing iPhone sales and a build up in Apple Inc’s inventory would continue to pressure radio frequency (RF) chipmakers such as Skyworks Solutions Inc and Qorvo Inc, brokerage Morgan Stanley said.
While the market for RF chips is expanding with the upgrade to 5G telecom networks from 3G/4G, iPhones account for more than a third of the market demand and a swing in Apple’s fortunes impacts RF chip makers more, analyst Joseph Moore said.
“A miss in iPhone units shipments and big upticks in channel inventory points to additional supply chain cuts for the June quarter,” Moore wrote in a research note. Shares of Apple were up 1.5 per cent in early trading, while Qorvo’s were little changed and Skyworks dipped 0.5 per cent amid a decline in the broader market.
Apple sold 77.3 million iPhones in the key holiday quarter, missing Wall Street expectations of 80 million. Apple plans to slash its iPhone X production target by half for the first three months of the year, to around 20 million units, the Nikkei reported late last month.
Several analysts have cut their estimates for iPhone X shipments in the past few weeks, citing a high price, among other factors, for muted demand for the 10th anniversary edition of the iPhone. Moore estimates Apple purchases about 10 percent of all semiconductors, and said the broader chip industry would benefit with a pick up in demand for the iPhone.
“Given Apple’s outsized influence, a reduction in their build rates and inventory could be the catalyst for industry conditions to loosen up.”...