For investors contemplating prospects for the smartphone market after a shaky earnings report from Apple Inc., Asian suppliers just provided a few hints: It’s going to get worse before it gets better.
Three suppliers that seldom command much attention, working behind the scenes to make devices sold under the brands of better-known customers, put out back-to-back earnings reports Tuesday. They spell trouble ahead for smartphone makers and other companies that once thrived on mobile mania.
Pegatron Corp., which assembles iPhones, missed profit expectations and said April sales dived 16 percent. Minebea Co., which makes LED lights for mobiles, lagged its own forecasts for revenue and earnings. Japan Display Inc., which supplies screens to Apple and others, said profit has deteriorated so rapidly it will lose money for the fiscal year and suspend a promised dividend. Adding to the gloom, Lenovo Group Ltd. tumbled to a four-year low as analysts warned of rising competition.
Asian components makers are positioned early in the supply chain so they often signal what’s ahead for giants like Apple, Samsung Electronics Co. and Xiaomi Corp. The iPhone maker offered evidence of a deteriorating market with its first quarterly sales decline in 13 years. Now, some are bracing for a possible triple-whammy: sliding sales, an unfettered market-share competition and crumbling prices.
Pegatron and its peers are merely the latest in a string of ill omens for a market facing its worst pace of expansion since Apple introduced the iPhone in 2007. Much of the gloom centers on China, the phenomenal growth engine that’s now headed for an epic shakeout. Smartphones are no longer a novelty and most domestic brands target the mid- and low-price ranges, where buyers don’t upgrade as frequently as those for high-end Apple and Samsung phones.