Apple shares fell 3 percent this morning after iPhone chipmaker Taiwan Semiconductor Manufacturing (TSMC) cut its revenue forecast for the second quarter of 2018.
The company and industry analysts point to weak demand for high-end smartphones as the main reason for the poor guidance. This likely has something to do with the fact that iPhone X sales have been in the gutter since early hype quickly died out late last year.
TSMC, the world’s largest semiconductor manufacturer, has long been producing Apple’s A-series processors for iPhone and iPad. Those chips have accounted for a large portion of the company’s revenue year after year, but performance for Q2 2018 has been disappointing.
TSMC blames weak smartphone demand
TSMC has forecast revenue of $7.8 billion to $7.9 billion for the second quarter. That’s significantly less than the $8.8 billion Wall Street was expecting — and it’s mostly due to the iPhone’s poor performance this year.
“Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining,” said Lora Ho, TSMC’s chief financial officer, in a statment to CNBC.
Ho won’t pin the blame on the iPhone specifically, since then wouldn’t do much for TSMC’s relationship with Apple — but analysts aren’t holding back. “Smartphone semi weakness [is] the main reason for the revenue shortfall,” Morgan Stanley’s Charlie Chan wrote in a note to clients Thursday.
“Beside the order cuts from the current Apple iPhone X processor, we attribute the major revenue shortfall in the smartphone segment to key customer MediaTek … and around a month’s delay of Apple’s new 7nm processor to July.”
Apple shares fall
As a result of TSMC’s poor revenue forecast, Apple shares fell about 3 percent in pre-market trading on Thursday. Shares in TSMC fell around 5 percent.
Apple will be hoping that this year’s iPhone upgrades can make up for disappointing demand for last year’s models. Recent rumors, alongside claims from a number of analysts, suggest we’ll see three new handsets this fall.
Alongside a refreshed iPhone X, we’re expecting a larger iPhone X Plus and a more affordable device with a 6.1-inch display. It is believed this model will look identical to iPhone X, with a similar edge-to-edge, and will carry Face ID.
