WSJ: Apple’s chipmakers took it on chin

When Apple sneezes, the supply chain gets the flu.

From “Apple’s Virus Warning Takes Bite Out of Chip-Maker Stocks” ($) in Wednesday’s Wall Street Journal

Semiconductor stocks slid Tuesday, pummeled by Apple Inc.’s warning that its revenue would be hurt by China’s coronavirus outbreak.

Broadcom Inc. fell 2.2%, Intel Corp. fell 1.7%, and Qualcomm Inc. fell 1.8%, while the S&P 500 was down 0.3%. Like many makers of computer chips, all three companies are Apple suppliers.

Shares of Qorvo Inc., a smaller firm that builds radio-frequency chips used by Apple, dropped 2.6%, while Cirrus Logic Inc., another Apple supplier, shed 3.2%.

Shares of Apple itself were down 1.8%.

My take: As I type this, Apple is up 0.5% in pre-market trading.

8 Comments

  1. Gregg Thurman said:
    Let’s see, the aforementioned chip makers supply Lenovo, Dell, Acer, Asus, Samsung, Xiaomi, Oppo, Motorola, Huawei and over a dozen others

    Let’s blame Apple.

    8
    February 19, 2020
    • Kirk DeBernardi said:
      @ Gregg T. —

      Spot on, Gregg.

      Also — by item count, collectively they make a crap-ton more than Apple, representing more income lost/delayed.

      0
      February 19, 2020
  2. Bart Yee said:
    “When Apple sneezes, the supply chain gets the Coronavirus.”

    FIFY. But really, all the chip suppliers will have this dip/lull like AAPL and eventually when production ramps back up, the orders will come back for them. Just in time inventory plays a part unless Apple chooses which week or month to recommence chip orders or build a buffer supply.

    Like AAPL’s 1.84% move yesterday, this is just market noise as it digests the China news over and over.

    And don’t they also supply many of the Chinese Android makers too?

    3
    February 19, 2020
  3. Alan Birnbaum said:
    As Katy Huberty adds that, “a larger than expected demand-related shortfall will just increase estimates in future quarters as we don’t view demand as perishable in light of strong retention rates among iPhone owners.”

    Couldn’t say it better myself !

    6
    February 19, 2020
    • Aaron Belich said:
      Exactly… we aren’t talking about daily consumables. Electronics will just be bought later and used forward from that point on until it requires replacement.

      Now… if this virus had a high mortality rate and targeted young, wealthy consumers. Well, then there may be a reason for concern.

      My apologies if that comes across as crass and apathetic.

      1
      February 19, 2020
  4. David Drinkwater said:
    “When Apple sneezes, the supply chain gets the flu.”

    This goes along with an idea from a former colleague, a Quality Engineer who said “effects are causes”. At first blush, this seems ridiculous, but the point he was making is that there are many dependencies, not just the easiest one that you first see.

    Let’s say parts A through Z all go into an iPhone. A through Y may be flowing (relatively) smoothly, but if Z is significantly delayed, orders for A though Y will also be slowed also, because it does Apple (or Foxconn) no good to own a large supply of A though Y. So if a plant is diminished to 50% capacity due toe the Wuhan Flu (an effect of the flu), all the other plants are demand-reduced by 50% (the effect becomes a cause).

    The logic is simply, but the supply chain is complex.

    I’m quite happy to see AAPL up by $2 so far this morning. As others have suggested, there is just a lot of market noise (and I am sure there will be more).

    0
    February 19, 2020
  5. James Dearborn said:
    Katy is right. Demand is still there. It will just be fulfilled in a later quarter. Skewing the YOY results for that quarter.

    3
    February 19, 2020

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