August 1, 2013 / 11:32 PM / in 4 years

UPDATE 2-Audience Inc joins list of hurting Samsung suppliers

(Recasts with sector concerns, analyst comment, shares)

By Aurindom Mukherjee and Neha Alawadhi

Aug 1 (Reuters) - Samsung Electronics supplier Audience Inc warned it faces a loss in the current quarter, joining a growing list of component makers that are hurting as sales of the upmarket Galaxy S4 smartphone fall short of expectations.

Shares in Audience, which makes chips that improve voice quality in mobile devices by filtering out background noise, fell 23 percent in after-hours trading to $9.70.

Samsung sold 76 million smartphones in its latest quarter, Strategy Analytics estimates, but many were cheaper models.

Analysts have in recent months slashed their sales forecasts for the S4 by as much as 30 percent and say stockpiles of unsold phones saw it cut orders for the most sophisticated parts.

Smartphone parts suppliers such as Audience, Atmel Corp and Maxim Integrated Products Inc, which all rely on Samsung for a major share of their revenue are now suffering, in a turnaround from strong sales in the past year.

“Samsung built more than they were able to sell, so they are presently going through an inventory adjustment,” RBC Capital Markets analyst Doug Freedman said.

“They messed up the supply chain with over exuberance.”

Profits at Samsung’s mobile division, which generates two thirds of its total earnings, slipped 3.5 percent in its latest quarter.

The Korean tech giant warned that global smartphone sales growth could weaken further in the third quarter, and said it expected stiffer competition. Apple Inc is expected to release new iPhones later this year.

Analysts that had forecast S4 shipments of around 10 million a month had, by June, cut that to around 7 million.

Audience surprised on Thursday by forecasting a loss of 9 to 13 cents a share in the third quarter, raising concerns about the company’s growth prospects.

“When you have that much exposure to the high-end and that market’s going down, obviously that’s going to definitely impact these guys,” said Chardan Capital Markets analyst Jay Srivatsa, who said Audience had little exposure to cheaper smartphones.

On Wednesday, Atmel, whose touchscreen controllers are used in many Samsung smartphones such as the recently launched S4 Mini, forecast third-quarter revenue below estimates, saying Samsung, its largest customer, had reduced forecast sales for its flagship product.

Maxim, which makes power management chips, last month forecast a weaker-than-expected quarter, prompting a string of cuts in broker price targets.

“Part of the reason that there might be a slowdown at Samsung is from more intense competition from LG and Sony,” Northland Securities analyst Tom Sepenzis said.

Component makers that are less exposed to Samsung’s top models have bucked the trend. Cypress Semiconductor Corp had a good second quarter, as its components are used throughout Samsung’s smartphone range.

Radio-frequency chip suppliers such as RF Micro Devices Inc , and Skyworks Solutions Inc forecast better-than-expected current quarter results as they also sell components to other smartphone customers such as LG Electronics , HTC Corp and Nokia.

Demand from other customers also insulated touchscreen chipmaker Synaptics Inc. It forecast current-quarter adjusted profit above analysts’ estimates. (Additional reporting by Lehar Maan and Sayantani Ghosh in Bangalore; Editing by Rodney Joyce)

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