| TOKYO/TAIPEI, April 21
TOKYO/TAIPEI, April 21 Apple Inc
marketing chief Phil Schiller let slip during last August's
courtroom battle with Samsung that when setting
forecasts for new iPhones, the inside joke was that people
should assume sales would equal all previous versions combined.
That quip, uttered in front of Samsung Electronics Co Ltd's
trial lawyers and the media, no longer rings true as Apple
appears to be losing a once vice-like grip on its supply chain
and Wall Street.
Suppliers and investors are struggling to gauge demand for
the iconic smartphone as Samsung and up-and-coming rivals grab
market share. Indications of reduced shipments now send shares
in Apple and its component-makers into a tailspin. And criticism
that innovation has stalled after the death of its legendary
co-founder Steve Jobs 18 months ago is hurting sentiment in a
stock that closed the week below $400 for the first time since
Sources at several Asian suppliers, which for years basked
in the glow of Apple's success and enjoyed stock gains even on
rumors they might be among the select group of companies to sell
components to Apple, told Reuters this week about ever-moving
deadlines and said they were trying to reduce their reliance on
An Apple supply chain source in Japan said those in the
industry often jokingly refer to the company as "Poison Apple"
because of its hard-to-meet high standards and low price
"'Apple can do no wrong' can only work until Apple does
wrong," said Roger Kay, president of researcher and consultancy
Endpoint Technologies Associates. "It's like the rubber band
effect. The more you stretch it, the more snap you get coming
Apple reports quarterly results on Tuesday and declined to
comment for this story. It has consistently said it focuses on
making the best products - its iPhones remain the industry gold
standard - and avoids discussing product strategy.
CEO Tim Cook stressed on the last quarterly earnings
conference call that it's difficult to paint a complete picture
of its production process from "a few data points".
Supplier sources in Japan and Taiwan, home to dozens of
Apple suppliers, said they initially expected mass-production of
the next iPhone to begin in June.
That date may have begun to slip beyond June, the sources
said. The phone, widely referred to as the iPhone 5S, is
expected to include new features such as a fingerprint sensor. A
supply chain source in Taiwan said Apple was trying to find a
coating material that did not interfere with the fingerprint
sensor, and this may be causing a delay.
In addition to the 5S, suppliers say Apple is also
developing a cheaper model, which can appeal to lower-income
buyers in growth markets such as China and India. A supplier
source in Japan told Reuters small-scale production of display
panels will begin in May, ramping up to mass production in June.
Both phones will use the same 4-inch screen, but the cheaper
version will probably not include the new fingerprint technology
and sport a cheaper plastic casing, the sources said.
SPECULATE AT WILL
Wild rumors plague every new iPhone launch. But this year
much of the blogger and industry speculation has centered on
whether demand for the iPhone is waning as an increasing number
of consumers choose alternatives, including phones from Samsung
- now the world's biggest seller of cell phones - and those
produced by other adopters of Google Inc's Android software.
Apple, the former darling of Main and Wall Street, rode a
seven-fold increase in its stock price in the four years to
September 2012. So Apple fans watched with increasing
consternation as the shares fell 44 percent since then, shedding
some $280 billion in market value along the way.
That fall was mirrored in the smartphone arena. In 2012,
Samsung became No.1 in the global market with a 30.3 percent
share, knocking off Apple - which had a 19.1 percent share -
partly by flooding the market with cheaper devices. For the
fourth quarter, Apple's share of the global smartphone market
fell to 21.8 percent from 23 percent a year earlier, according
to research firm IDC.
The erosion of Apple's industry and market supremacy over
the past year may embolden carrier partners and suppliers,
analysts say. That could mean tougher negotiations over
component costs and the subsidies carriers pay to stock iPhones.
To be sure, Apple had a record 2012 in sales and profit. Its
iPads lead the tablet market, and its Mac computers continue to
outperform in a shrinking PC market. Analysts also say slowing
growth is inevitable for a company its size.
But its recent stock-market descent has unnerved many
investors struggling to get a read on what Apple's numbers could
look like on Tuesday - just days away from when Samsung begins
selling a new Galaxy S4 smartphone with a sharper screen and
plethora of software-enhanced features.
Look no further than Cirrus Logic Inc. The
chipmaker, with just $700 million in revenue, precipitated an 8
percent drop in Apple's share price over Wednesday and Thursday
when it warned of reduced forecasts from one customer, widely
assumed to be Apple. The warning spooked investors because
Cirrus Logic relies on Apple for more than 90 percent of its
Shares in Apple suppliers across the globe, including
chipmaker Qualcomm, South Korea's LG Display Co Ltd
and Japan's Toshiba Corp, declined as a result.
On Tuesday, Apple is expected to report a mere 8 percent
increase in revenue in its fiscal second quarter, among the
weakest showings in years, according to average analysts'
estimates. And net earnings are expected to inch up just 2
percent as the intensifying competition compresses its margins.
Some say Apple's current market malaise is a re-balancing
from the years when the stock was celebrated as a sure-fire bet.
The market became "irrational" about Apple with some
analysts floating a $1,000 target price a year ago, said one
hedge fund manager focused on the technology sector. Investors
should have taken note when Apple missed revenue expectations in
each of the past three quarters, said the manager, who declined
to be identified.
"The market is not being irrational with Apple today," he
said. "The market was being irrational with Apple last year,
when they kept taking the stock price higher."