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Largan Precision shares plunge on report of sales drop

Taiwanese maker of camera lenses takes hit US as tech giant cuts iPhone X orders

Apple iPhone X handsets are displayed at an Apple Store in Paris on Nov. 3.   © AP

TAIPEI -- Shares of iPhone camera lens maker Largan Precision plunged Wednesday, closing down nearly 10%, after the supplier to gadget maker Apple warned that its revenue in December will fall, versus the previous month, during a traditionally strong period for iPhone shipments.

According to a report by Taiwan's Economic Daily News published Wednesday, Largan's weakness in December comes from a drop in orders from some customers, although it did not specify which ones.

Largan had sales of 5.61 billion New Taiwan dollars ($187.2 million) in November, flat from October but up 8% on the year.

The Taiwanese company supplies lenses for all iPhone models and for the iPhone X's Face ID module.

Shares of Largan, the Taipei exchange's most valuable issue on a per-share basis, closed at NT$4,265, its lowest point in more than eight months. "It's really below the market expectation and tells a lot about weakening iPhone X demand. There is no supercycle for the premium model after all," said Jeff Pu, an analyst at Yuanta Investment Consulting.

According to Pu, Apple has scaled back orders for the iPhone X to 63 million units from 69 million previously, for the period from November 2017 to March 2018.

"Component-wise, we learned from the supply chain check at the end of November that Apple has notified suppliers to cut orders [by] some 11-12% for parts that go into the iPhone X," said Pu, adding that it is very likely the U.S. tech giant may cut orders again in January.

Previously, Apple already slashed orders for the iPhone 8 and 8 Plus for the first quarter of 2018 by 50% to some 16 million units compared with the current quarter, according to Yuanta Investment Consulting.

Bad news all around

Almost all key Apple suppliers saw their shares drop sharply Wednesday. iPhone casing supplier Catcher Technology shed 6.33% to NT$311 as its monthly revenue in November fell short of the market consensus.

Shares of Hon Hai Precision Industry, a main iPhone assembler and sole maker of the iPhone X, tumbled 2.72%, while Taiwan Semiconductor Manufacturing Co., sole supplier for iPhone's core processor chips, also lost more than 1%. Hon Hai's shares have lost more than 17% of their value over the past month, while those of TSMC have fallen more than 5% over the period.

Elsewhere in Asia, shares of AAC Technologies, which makes speakers for iPhones, tumbled 7.28% in Hong Kong on Wednesday. Sunny Optical, Largan's Chinese rival and the country's largest camera module maker, slid 12.45%. Apple battery supplier BYD Electronics fell 6.5%.

Apple itself has fallen about 2.6% over the past month.

Taiwan's benchmark index dropped 172.93 points, or 1.63%, on Wednesday, to 10,393.92. Hong Kong's Hang Seng Index fell 2.14% the same day, due to setbacks in tech stocks and Washington's announcement that it is moving its embassy in Israel to Jerusalem.

Shares of big suppliers to top-tier Chinese smartphone brands of Huawei, Oppo, Vivo and ZTE also tumbled. MediaTek, a mobile chip designer that sells to Chinese handset makers, skidded almost 10%, although the issue is up more than 30% this year.

Chinese fingerprint sensor maker Q Tech's shares lost 8.89% and have declined more than 25% in the past three months, although the stock has more than doubled in price so far this year.

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