Infineon's Woeful Outlook Is a Result of Apple's Slowed iPhone Production

Buried in the long, confessional press release from Infineon (IFX) about its woeful outlook is a tidbit that appears to confirm recent reports that Apple (AAPL) has slowed production of the iPhone.

In the release, Infineon reports that “revenues in the Wireless Solutions segment” in the December quarter “are anticipated to be strongly negatively impacted by the weakening of global demand and, in addition, by a reduction in demand at one specific customer.” (Emphasis added.)

Infineon provides Apple with the HSDPA wireless data chip used in the iPhone. Analysts note that in the September quarter, Infineon actually outperformed expectations due in part to strong sales to Apple, as it ramped up iPhone production. But Apple built up considerable channel inventory in the September quarter - about 2 million of the 6.9 million iPhones sold - as it spread distribution into more countries. A month ago, chip analyst Craig Berger, of Friedman Billings Ramsey, forecast that iPhone production in the fourth quarter would be down 40% from Q3.

Dresdner Kleinwort analyst Robert Sanders, in his note this morning on Infineon’s results, pointed out that the chipmaker’s strong results for its fiscal fourth quarter ended September were due in part to strong sales to Apple for the iPhone, but that Apple now “appears to be holding back on replenishing IC inventory.” Citigroup’s Glen Yeung this morning likewise identified the “one specific customer” as Apple.

Disclosure: None

Comments

[BMWTwisty:]

You just keep schlepping this crap from blog to blog. Pathetic.

2008 Dec 03 03:37 PM

[rd4sndk:]

Apple publiched that it sold 6.9 million phones. How do you know or anyone know that the 2 million is not additive to the 6.9 million sold as apposed to being subtractive. By your logic, 2 million would be a little under 5 weeks of inventory. I doubt Apple has that much inventory on hand given the iphones global expansion, the high market share growth and the faulting of RIMM's touch screen offerings. If any ones responsible for phone cut backs to infineon its RIMM not Apple.

2008 Dec 03 05:03 PM

[reinharden:]

When reading between the lines with chip providers, it's also important to recognize that the chip sales typically take place anywhere from 6 weeks to 3 months ahead of the retail product sales.

So one would expect Apple to reduce orders of components in calendar Q4 because most of those components would be going into products to be sold in calendar Q1 -- traditionally Apple's weakest quarter.


I don't track IFX, so I can't speak as to its previous behavior. But it'd be worth comparing and contrasting the two company's previous quarterly reports so as to get a better feel for the correlation between IFX and AAPL as a predictive tool

reinharden

2008 Dec 03 05:16 PM

[Roger Knights:]

Is it possible that Apple overstocked initially in order to get a good quantity discount, or to be assured of having vital parts on-hand in case of a problem at the supplier? Since chips take so little space, it wouldn't hurt them to build up a big inventory.

2008 Dec 03 05:42 PM

[Roger Knights:]

PS: Alternatively, is it possible Apple over-ordered initially with the intent of cutting its order-rate sharply later, in an effort to drive down its stock? (This would be in-line with its absurdly low earnings guidance for the Dec. quarter.) ONE possible motive for this might be to lure short-sellers into a trap, and spring the trap in January with great product announcements at Macworld, and a great earnings report two weeks later.

Ordinary companies wouldn't behave in such a Machiavellian way, of course, but this is no ordinary company.

2008 Dec 03 07:02 PM

[Jon T:]

For your sake Eric Savitz this had better be true...

If I were you I would worry that the major customer being referred to may just be Research in Motion and not Apple at all...

2008 Dec 04 10:34 AM