Apple’s move to cut orders may impact chip companies in Malaysia

There could be a one-off earnings decline effect in Malaysian semiconductor earnings this year due to a plan by Apple Inc to reduce orders by up to 20% in the second half of the year.

Citing industry sources, Japan-based The Nikkei reported that Apple is expecting to ship 80 million new iPhone models this year, which is lower than the 100 million of what it had planned at the same time last year.

The report had ignited some fears that Malaysian semiconductor players could be further affected after the storm that was unleashed upon the technology sector as a whole at the beginning of the year, which saw large losses in their share prices.

However, some analysts and observers are not so negative on this new development, noting that the worst could have already been factored into current prices, and that technology players are today progressively looking to other industries to fuel growth.

“Malaysian tech companies’ growth today comes not only from the smartphone industry alone, but rather more increasingly the automotive industry. But that being said, many still derive a significant portion of their sales from the smart device segment,” said an industry observer.

MMS Ventures Bhd ’s (MMSV) chief executive officer Sia Teik Keat told StarBiz that this development of Apple ordering 20% less is not a surprise to those who follow the industry closely.

“It may be a surprise to the market, but we have already anticipated this in our forecast to the analysts and investment bankers that follow our company and industry closely. This is why in my earlier interview, I had said that we are expecting revenues to drop by about 15% this year in all: it is due to this reason,” Sia said.

“For us at MMSV, we are a machine maker, so we will see the effects in advance during the second and third quarters (six months before), while companies that make components will see the effects in more real time in the third and fourth quarters.

Listed semiconductor component makers in Malaysia include Globetronics Technology Bhd , Inari Amertron Bhd and Malaysian Pacific Industries Bhd (MPI).

https://www.thestar.com.my/business/business-news/2018/06/12/apples-move-to-cut-orders-may-impact-chip-companies/