Apple Supplier of iPhone 3D Optical Sensors Warns of Weak First Quarter Outlook, Skips Dividend

Discussion in 'iOS Blog Discussion' started by MacRumors, Feb 5, 2019.

  1. MacRumors macrumors bot


    Apr 12, 2001

    The Austrian firm that supplies Apple with optical sensors for 3D facial recognition features in iPhones expects revenue to fall in the first quarter of 2019 (via Reuters).


    Sensor specialist AMS said its adjusted operating profit fell more than half in the fourth quarter of 2018 and it would not pay out a dividend because of slow demand from a "major customer" and restructuring costs.

    AMS generated adjusted earnings before interest and tax (EBIT) of $61.9 million and revenue of $491 million in the three month through December. The company said it expects revenue to fall in Q1 2019 to $350-390 million, amid continued weak smartphone demand and a seasonal first-quarter dip in the consumer market.

    AMS provides Apple with the optical sensors in its TrueDepth camera system featured in the iPhone XR, XS, XS Max, and 2018 iPad Pro. The Austrian group is said to generate around 45 percent of sales from Apple. Low demand for Apple's newest iPhones in China has reportedly put added pressure on AMS.

    As early as November last year, reports began emerging that Apple had slashed production orders for its latest iPhone XS, iPhone XS Max, and iPhone XR models due to lower-than-expected demand, among other reasons.

    While multiple reports have suggested the iPhone XR sold well over the holiday period, it did not sell as well as Apple had expected, at least in some areas around the world.

    Apple lowered its earnings guidance for the first fiscal quarter of 2019 due to weak iPhone sales and has reportedly cut iPhone XR, XS, and XS Max production for the January to March quarter.

    Article Link: Apple Supplier of iPhone 3D Optical Sensors Warns of Weak First Quarter Outlook, Skips Dividend
  2. HJM.NL macrumors 68000


    Jul 25, 2016
    I’m always wondering how it’s possible that every supplier of Apple always run into trouble when the demand of Apple is slowing a bit. Don’t they have any margins on their products or is Apple the only one to grab the profit margins. Just wondering.
  3. JonGarrett, Feb 5, 2019
    Last edited by a moderator: Feb 5, 2019

    JonGarrett macrumors newbie


    Mar 27, 2016
    New York, NY
    Some Apple suppliers rely almost entirely on Apple's only product which Apple relies on completely--the iPhone.

    If your only customer sells fewer of their products that means you sell less if yours.

    The iPhone is 60%+ of Apple's profits, Apple makes a lot of money selling them at if you're business depends on their business then you suffer when they suffer.

    They have margins, they just only have one.
  4. 69Mustang macrumors 603


    Jan 7, 2014
    In between a rock and a hard place
    No matter how much margin those companies have on their products if the volume isn't there the margins don't mean much when revenue is down. If a company sells 25 or 45 percent less YoY, the margin ain't gonna mean much to the market.
  5. HJM.NL macrumors 68000


    Jul 25, 2016
    Understandable and never wise to be dependent on one customer.
  6. ikramerica macrumors 6502

    Apr 10, 2009
  7. Scottsoapbox macrumors 6502a


    Oct 10, 2014
    Porter's 5 Forces describes how profits are distributed in an industry. Specifically, the 'power of suppliers' is important here. Apple has a lot of (negotiating) power over their suppliers and therefore can claim most of the value chain profits by demanding lower prices from suppliers (or lose the contract). This squeezes the supplier margins while increasing Apple's margins.

    Further, costs are driven by economies of scale which often need certain thresholds for maximum efficiency (i.e., lowest unit cost).

    So, if you fall below a certain amount of units, your unit costs go up, and your margins were already slim because you negotiated based upon selling the projected amount.
  8. raskar macrumors member


    Jan 17, 2007
  9. Val-kyrie macrumors 68000

    Feb 13, 2005
    But, but, but ... these are the best selling iPhones ever! Right?
  10. Bawstun macrumors 65816


    Jun 25, 2009
    Bad bad bad. Sales of their main source of revenue are trending down and show no signs of stopping.

    Save Apple before it is too late, act NOW shareholders. Fire Tim Cook. Please.

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