Wed, Jan 16, 2013 - Page 15 News List

Apple falls on reports of cuts to parts orders

Reuters

Shares in Apple Inc dipped below US$500 for the first time in almost one year after reports it is slashing orders for screens and other components from its Asian supplier as intensifying competition erodes demand for its latest iPhone.

Japan’s Nikkei Shimbun reported on Monday that the world’s largest technology company began sharply reducing buying of LCDs about a month ago from suppliers like Japan Display Inc and Sharp Corp.

Sharp’s stock dipped as much as 7 percent in early trading yesterday and shares in South Korean Apple suppliers such as LG Display also fell.

“We can’t comment on individual clients,” said Miyuki Nakayama, a spokeswoman for Sharp, which builds iPhone 5 screens at its Kameyama plant in central Japan.

Japan Display, a state-run business formed from the small LCD units of Sony Corp, Toshiba Corp and Hitachi Ltd also declined to discuss its orders. The Nikkei report, later matched by the Wall Street Journal comes as hard-charging rivals like Samsung Electronics Co, which makes phones based on Google Inc’s popular Android software, continue to expand market share globally.

Apple stock slid more than 4 percent to an intraday low of US$498.51 — a level not seen since Feb. 16 last year — before bouncing back to trade just above US$500 at midday. The news also hurt shares of suppliers such as Cirrus Logic Inc, which dived 9 percent.

Some analysts argued that Apple and its manufacturing partners had struggled with quality issues that might have curtailed production times.

Dogged by low production yields, Sharp last year fell behind schedule for iPhone 5 screen shipments in the run-up to the phone’s launch in September. Sharp has yet to acknowledge that Apple is a customer.

“Our checks with supply chain contacts close to the situation identified a very different cause: a slower ramp in the manufacturing of iPhones and iPads [reflecting some quality control issues] and insufficient production lines,” JoAnne Feeney of Longbow Research said.

“Rather than ordering more components and having inventory build up further, Apple put component suppliers on notice to hold off, for the time being, on further shipments until it expanded its production lines — which it plans to complete by the end of the quarter,” she said.

By some estimates, the holiday quarter may have been the worst for US retailers since the 2008 financial crisis, with sales growth far below expectations. Other data yields a more mixed picture of holiday season demand.

Apple was not immediately available for comment. No one at Sharp was immediately available to comment on Monday — a national holiday in Japan — and parts suppliers to Apple in Taiwan declined to comment.

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