OSAKA -- Murata Manufacturing, hit by high costs of mass production for a key smartphone component, has slashed its profit projection for the year ending March 2018.
The company cut its net profit projection Tuesday to an 8% drop from the previous year to 144 billion yen ($1.26 billion), compared with the earlier projected 11% rise to 174 billion yen.
Multilayer resin substrate, which Murata calls MetroCirc, is a major culprit. With a thickness of about a fifth that of conventional substrates, it can be bent freely and molded, thus helping make iPhones thinner.
Murata sought to raise the output volume by using bigger production facilities, "but we stumbled there," Chairman and President Tsuneo Murata said.
MetroCirc production requires a high level of expertise, and the proportion of defective output has not improved. Meanwhile, labor and material costs have been coming in higher than expected. MetroCirc-related costs will push down Murata's operating profit by 20 billion yen.
Concerns are heightening that shipments of the substrates for Apple's newest handset, the iPhone X, may be delayed. Chairman Murata refrained from making a definitive comment but said, "we have been keeping up with the volumes requested by our customers."
Furthermore, recovery of Chinese demand for profitable high-frequency parts is likely to be slow this fiscal year. Spending to boost production capacity has increased depreciation charges as well.
Meanwhile, with overall electronic parts demand strong, Murata upgraded its sales forecast to 1.36 trillion yen, up 20% from the previous year and an increase of 137 billion yen from earlier plans.