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IQE takes a knock after revenue warning from Apple, with the chipmaker a supplier for the latest iPhone

Analysts at Peel Hunt pointed out: “While it’s a first since Tim Cook took over in 2011, this will not be a surprise to those who have followed the IQE’s guidance cut and saw un-Apple like sweeteners on new iPhones deals”
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Back in November, IQE forecast a 16.4% decline in its full-year profits, citing a drop in orders at a major chipmaker which supplies 3D sensing technology

IQE plc (LON:IQE) saw its shares come under pressure on Thursday following a revenue warning from tech giant Apple Inc (NASDAQ:AAPL), with the chipmaker a supplier for the US firm’s latest flagship iPhone.

In a statement released after the New York close on Wednesday, Apple said it will be reporting revenue below the low-end of its guidance issued 60 days ago – at US$88.3bn versus US$89-US$93bn - for the quarter ending 31 December 2018, it's first warning since Tim Cook took over as CEO.

However, in a note to clients, analysts at Peel Hunt pointed out: “While it’s a first since Tim Cook took over in 2011, this will not be a surprise to those who have followed the IQE’s guidance cut and saw un-Apple like sweeteners on new iPhones deals.”

READ: IQE shares recover slightly from Monday plunge but group confirms reduction in financial performance

Back in November, IQE forecast a 16.4% decline in its full-year profits, citing a drop in orders at a major chipmaker which supplies 3D sensing technology.

The Peel Hunt analysts pointed out that Apple said of the four headwinds it expected in the quarter, three played out in-line - timing of new products, US dollar headwinds and supply constraints for some new products.

However, they added: “What surprised was the magnitude of the expected slowdown in emerging markets (mostly China).“

The analysts said: “This, coupled with a disappointing developed market upgrade cycle, drove the material impact on revenue.”

According to Apple, they noted, an economic deceleration in Greater China accounted for over 100% of the year-on-year decline in the tech giant’s worldwide sales.

The analysts pointed out: “The company flags a slowdown in traffic to retail outlets in China, pointing to the impact trade wars have had on Chinese consumer confidence. This, coupled with other data, suggests a sharp contraction in the Chinese smartphone market in 4QCY18.”

They said that “with China being a key market for both Apple and Android ecosystems, we think the news is somewhat negative for all suppliers reliant on smartphone volume sales (eg, IQE).”

But they added: “It does suggest that if there is to be a trade agreement between the US and China, consumer sentiment could improve as rapidly as it declined.”

The analysts said they think the news “slightly increases very near-term uncertainty for IQE.”

In afternoon trading, IQE shares were 5.1% lower at 60.00p.



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