TAIPEI -- Catcher Technology, a key Apple metal casing supplier, suffered deteriorating margins and a double-digit drop in sales and net profit in the second quarter ending in June, amid weak demand for the iPhone 6s.
The company's prospects are further clouded by a 3.8% year-on-year drop in revenue in July at what should be a peak time for shipments before Apple unveils its new smartphone range in September.
Market watchers are speculating that Apple will replace metal casings for iPhones with glass material next year in order to compete with Samsung Electronics' premium handsets. Earlier this week Catcher said it would cancel an earnings teleconference originally scheduled on Friday, in a move interpreted as a sign of its weakening market position.
"Catcher has little bargaining power against Apple and Apple has been putting a lot of pressure on suppliers to cut prices this year," said Jeff Pu, an analyst at Yuanta Investment Consulting.
Pu said that Catcher will face even greater pressure in the second half of 2017 due to Apple's switch to glass casing, as the Taiwanese company will be left providing only the metal frames for 4.7-inch handsets, and will see its average selling price fall as much as 37% from the $35 it currently charges for metal casing units.
In the April-June period, Catcher reported net profit of 3.8 billion New Taiwan dollars ($120.6 million) on revenue of NT$17.52 billion, year-on-year falls of 26.4% and 12.9% respectively. Margins also declined significantly, with the operating margin dropping from 37.3% to 28%.
Catcher currently shares orders for metal casing for the 4.7-inch iPhone 6, iPhone 6s and upcoming iPhone 7 with U.S-based manufacturer Jabil and key iPhone assembler Hon Hai Precision Technology and its affiliate Foxconn Technology.
Catcher also supplies casings for MacBooks and iPads. Apple accounts for more than 50% of Catcher's revenue, according to a Goldman Sachs analyst note released in July.
Metal casing for 5.5-inch premium Apple handsets and the lower-priced iPhone SE are dominated by Hon Hai and Foxconn.
Apple has seen its sales drop for two consecutive quarters since the beginning of this year, ending a consecutive eight-year period of growth.
The Nikkei Asian Review reported in May that Catcher Chairman Allen Horng said Apple will have only one device adopting glass casing next year.
Market watchers have speculated that Apple will use advanced organic light-emitting diode panels, to be supplied by Samsung, together with glass casing for its premium handset from next year.