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Apple Falls Anew Amid iPhone 7 Worries, Chip Stocks Follow

Apple ( AAPL ) stock tumbled to its lowest level in nearly two years on Thursday, following a report that Asian component suppliers are seeing weak orders related to the upcoming iPhone 7. Japanese business publication Nikkei Asian Review reported Thursday that Taiwan-based tech suppliers expect to get significantly fewer orders from Apple in the second half of this year compared with the year-earlier period. They cited the “ongoing slump in demand for premium smartphones and a lack of groundbreaking features for the upcoming iPhone 7.” Nikkei Asian Review this week also reported that Taiwan Semiconductor Manufacturing ( TSM ) expects its iPhone chip shipments for the June-to-December period will be about 70% to 80% of the level reached in the second half of 2015. Credit Suisse analyst Kulbinder Garcha said the market overreacted to the Nikkei report. The prediction that iPhone builds would be down 20% to 30% in the second half of the year vs. the same period in 2015 was expected and already should have been baked into the stock’s price. “While the news is clearly disappointing, it was already largely included in our iPhone unit estimates,” he said in a report Thursday. Elsewhere, Taiwan-based contract manufacturer Foxconn Technology Group said its first-quarter net profit fell 9.2% from a year earlier, as it was hit by a slowdown in iPhone sales, the Wall Street Journal reported Thursday . Foxconn is Apple’s main iPhone assembler. Apple shares were down more than 2.5%, near 90, in afternoon trading on the stock market today . TSM shares were down 1%, near 23. IBD’s Take: How healthy is Apple’s stock and how does it stand up vs. rivals? Find out at IBD Stock Checkup . Other Apple chip suppliers were down Thursday as well, including InvenSense ( INVN ), NXP Semiconductors ( NXPI ), Cirrus Logic ( CRUS ), Broadcom ( AVGO ), Skyworks Solutions ( SWKS ), Qorvo ( QRVO ) and Texas Instruments ( TXN ). Apple stock has risen in only four of the last 20 trading sessions. Since hitting its 2016 high of 112.39 on April 14, Apple stock has fallen about 20%. Most of the decline happened after the Cupertino, Calif.-based company reported March-quarter results and gave June-quarter guidance on April 26. For its fiscal Q2, Apple posted its first year-over-year sales decline since 2003 and its first-ever drop in iPhone unit sales. For the current Q3, Apple is targeting sales of $42 billion, down 15% from the same period last year. Demand for Apple’s latest handsets, the iPhone 6S series, has been relatively weak, and hopes for a return to unit sales growth have shifted to the iPhone 7, expected to be released in September. The iPhone 7 is predicted to feature a slimmer design, a speedier processor and a better camera. It also might be waterproof for the first time, according to tech news reports. But it is expected to look pretty much like the current models, with tweaks like the lack of an audio headset jack. RELATED: Apple Stock Gets Price-Target Cut On Longer iPhone Upgrade Cycle .

Apple Suppliers Blame ‘Tepid’ iPhone 7 Demand On Lack Of Innovation

Taiwan Semiconductor Manufacturing ( TSM ) will grow 4% in 2016, missing projections for 5%-10% growth, as Apple ( AAPL ) cuts its iPhone 7 orders June through December, a source told the Nikkei Asian Review on Wednesday. Nikkei’s report comes on the heels of disappointing June-quarter guidance from Apple suppliers Skyworks Solutions ( SWKS ), Cirrus Logic ( CRUS ) and InvenSense ( INVN ). Tuesday, TSM reported Q1 sales that missed by $30 million and dipped 13% year over year. In afternoon trading on the stock market today , Taiwan Semi stock was down a fraction, near 23. June through December, TSM’s chip shipments will shrink to 70%-80% of year-earlier levels, sources told Nikkei. TSM is now projected for “tepid” 4% year-over-year sales growth and flat operating profits in 2016. In 2015, sales rose 7.5% to $25.95 billion. “Suppliers are saying that they are getting fewer orders for the second half of this year compared with the year-ago period,” a source told Nikkei. “The traditional peak season this year will not be able to compare to the past few years.” The report jibes with worries of a slowdown in smartphone sales. Last month, Apple missed its March-quarter Q2 sales for the first time in 13 years and guided its June-quarter sales down 15%-19% sequentially, which is the seasonal norm. The only Chinese smartphone makers showing healthy growth are Huawei and Oppo, the source said. Apple CEO Tim Cook has said his company plans to lower its channel inventories by $2 billion in the June quarter “in light of the macroeconomic environment.” Apple has tapped TSM as the sole source of its A10 processor for the iPhone 7, expected for release in September. Last year, TSM and South Korean rival Samsung both supplied the A9 processor for the iPhone 6S. About 16% of TSM’s sales stem from Apple. Nikkei estimates Apple will ship more than 200 million iPhones this year, down from 230 million in 2015. A source with a major Taiwanese supplier blamed the lack of innovation in the iPhone 7 for the weak demand, Nikkei reported.

InvenSense Sales Expected To Topple After Apple iPhone Shortfall

Apple ‘s ( AAPL ) iPhone shortfall could draw InvenSense ( INVN ) into the tornado late Monday when the sensor-chipmaker is expected to report its first-ever sales decline and its biggest earnings fall to date. InvenSense stock toppled 5.5% to 7, falling the most of IBD’s 41-company Electronic Semiconductor-Fabless industry group which was up a fraction on the stock market today . Fellow Apple suppliers Broadcom ( AVGO ) and Qualcomm ( QCOM ) stocks rose 1.2% and 0.1%, respectively, vs. flat shares of NXP Semiconductors ( NXPI ) and Cirrus Logic ( CRUS ). InvenSense follows radio-frequency supplier Qorvo ( QRVO ), which reported earnings last Wednesday. The consensus of 13 analysts polled by Thomson Reuters models $79.9 million in sales and 2 cents earnings per share ex items for InvenSense’s fiscal Q4. On a year-over-year basis, sales and EPS would be down 20% and 83%, respectively. It would be InvenSense’s fifth straight quarter of decelerating sales growth, and the first time the Apple supplier has seen sales fall vs. the year-earlier quarter. Earnings fell 14% last quarter. Three months ago, InvenSense guided to $77 million to $83 million in sales and 0-2 cents EPS ex items. During the January conference call, CFO Mark Dentinger noted a step-down at “the North American customer” — widely assumed to be Apple — and lighter sales in Korea. He expected Internet of Things sales to help fill those holes. On April 26, Apple reported its first-ever year-over-year iPhone sales decline and its first revenue drop since 2003. Teardowns show InvenSense supplies a gyroscope/accelerometer combination chip for the iPhone 6S. But InvenSense is forecast for 13% sales and 2% EPS growth in fiscal 2016 to $420.9 million and 47 cents, respectively, on healthier metrics earlier in the year. Apple shares rose 1% intraday after hitting a 2-year low on Friday.