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An Apple a Day Might Disappoint Semiconductor Investors

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Semiconductor investors eye Apple’s upcoming earnings

Among the most important earnings results of the season are those of Apple (AAPL), a major customer for several semiconductor companies. Apple is set to release its fiscal 2019 first-quarter results on January 29 after the market closes. Analysts expect the company to reports its first YoY (year-over-year) December-quarter decline, based on concerns that new iPhones’ higher prices will impact sales volumes. Normally, the quarter is Apple’s strongest, as it includes three months of sales of its latest iPhones.

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In Apple’s fiscal 2018 fourth-quarter earnings call, CEO Tim Cook stated that the company would stop reporting units sold from fiscal 2019 onward. On January 3, he lowered the company’s fiscal 2019 first-quarter revenue guidance by $7 billion from the midpoint of $84 billion–$91 billion, reflecting a significant slump in iPhone unit sales.

Apple suppliers lower revenue guidance

Several Apple suppliers followed Apple and lowered their guidance for the December quarter. Skyworks (SWKS) lowered its fiscal 2019 first-quarter revenue guidance from $1.01 billion at the midpoint to $970 million, representing a 4% YoY decline, and Qorvo (QRVO) lowered its fiscal 2019 third-quarter revenue guidance from $890 million at the midpoint to $820 million, representing a 3% YoY decline.

A day before its earnings release, Apple stated that it increased its spending on American components by 10% YoY to $60 billion last year. In an atypical move, the iPhone maker also named some of its suppliers, identifying Qorvo, Skyworks, and Broadcom (AVGO).

It remains to be seen if these developments will reassure semiconductor investors about Apple suppliers’ growth. Semiconductor investors should make a note of Apple’s fiscal 2019 second-quarter guidance for an idea of how falling iPhone sales could affect chip suppliers.

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