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Apple supplier IQE warns on profits in sign of tough smartphone market

Hannah Boland
Earlier this month Apple said it would no longer be splitting out how many iPhones, iPads and Macs it sells every quarter - TASS

Shares in Apple supplier IQE failed to recover from Monday's slide, after it confirmed that a major customer was materially reducing its shipments following a warning yesterday. 

IQE confirmed it was notified on Monday that a chip company which is part of the same supply chain, Lumentum, "had received notice from one of their largest customers for 3D sensing laser diodes that they would materially reduce shipments for the current quarter".

It said, in light of this news, it now anticipated it would generate revenue of £160m and adjusted earnings of £31m for 2018. Analysts had been expecting revenue to come in between £176m and £178m, and adjusted earnings of around £44m. 

IQE, a semiconductor maker, had first signalled it could take a hit late on Monday afternoon, rushing out an update after Lumentum warned over profits and cited a drop in orders for the VCSEL chips, used for 3D sensing.

Both Lumentum and IQE are part of the supply chain for those chips, which are used in iPhones.

Neither company named Apple as the big customer, but it was widely thought the iPhone maker was being referred to in the updates.

Monday's warning hammered shares in Apple and its key suppliers, wiping around 5pc off the iPhone maker and as much as 33pc of Lumentum, as investors worried demand for smartphones was drying up. 

IQE dived 29pc yesterday, and failed to recover those losses in morning trade today, while screen maker Japan Display slipped as much as 14pc. 

Chaim Siegel, an analyst at Elazar Capital, said: "Many suppliers have lowered numbers because of their unnamed 'largest customer,' which is Apple. Apple got cautious in their guidance and it's hitting their suppliers."

Apple declined to comment on its production plans, but sales growth in the phone market has been slowing in recent quarters, as it has become increasingly saturated.

Earlier this month, Apple said it would no longer be splitting out how many iPhones, iPads and Macs it sells every quarter, in what was seen as an indication that iPhone sales were slumping.