SAN FRANCISCO Apple Inc's(AAPL.O) shares fell below $400 on Wednesday for the first time since December 2011 after a U.S. chip supplier's disappointing revenue forecast fanned fears about weakening demand for the iPhone and iPad as competition intensifies.
The surprise warning by Cirrus Logic Inc(CRUS.O) knocked down shares of key component suppliers like South Korea's LG Display Co Ltd and Japan's Toshiba Corp on Thursday in Asia, a region that supplies the lion's share of chips, cases and displays for the Cupertino, California-based company.
The Cirrus Logic revenue forecast fueled fears that demand for the iPhone - which makes up more than half of Apple's revenue - is slowing more quickly than expected as Samsung Electronics Co Ltd and other rivals that use Google Inc's Android software flood the market with cheaper phones. It has also thrown the spotlight on Apple's quarterly earnings announcement due out next week, with some analysts saying the results could miss already reduced estimates.
"This is a tough environment. Apple is in transition between products," said Michael Yoshikami, a portfolio manager at California-based Destination Wealth Management, which owns about 50,000 Apple shares. Cirrus's warning "makes it more likely Apple's not going to surprise on upside."
Cirrus Logic, which makes analog and audio chips for the iPhone and iPad, warned of a reduced product forecast from one customer - which it did not name. But 90 percent or more of its business comes from Apple, making it a key indicator of demand for iPhones and iPads.
That sent shares of Apple below $400 briefly before they ended 5.5 percent lower at $402.80. The drop wiped off more than $22 billion of market value.
In Asia, shares of flat-screen supplier LG Display shed 4 percent and mobile chip maker SK Hynix slipped 3 percent. NAND flash maker Toshiba and component maker Murata Manufacturing Co Ltd both fell 2 percent.
LG Display will report earnings on Monday and SK Hynix next Wednesday.
BEARISH ON SUPPLIERS
"We've been bearish about shares of Apple's suppliers for quite some time," said Andrew Wang, Chief Investment Officer of Manulife Asset Management in Taiwan.
"It is now very clear that Apple's market share has reached the peak, given that Samsung has taken a big chunk of it and HTC has had a few nice models since last year," he said, referring to Taiwanese smartphone maker HTC Corp.
Cirrus's weak forecast followed a 19 percent decline in first-quarter sales at Taiwan's Hon Hai Precision Industry Co Ltd, Apple's main contract manufacturer. The Taiwanese company makes an estimated 60 to 70 percent of its revenue assembling iPhones and iPads, and carrying out other work for Apple.
Hon Hai shares were down 1.2 percent on Thursday.
Since its September 2012 peak, Apple has lost 40 percent of its market value or more than $280 billion - slightly more than Google Inc's(GOOG.O) entire capitalization - battered by worries about the effect on Apple's industry-leading margins if it is forced to do faster updates of its products to keep up with rivals.
Some say Apple will not be able to sustain its high gross margins as competition in the tablet and smartphone markets leads to lower prices. Shorter product cycles limit Apple's ability to bring down component costs, Bernstein Research analyst Toni Sacconaghi said in a note to clients.
"It's a reminder of weakening demand and the challenges around product transitions," Shannon Cross, of Cross Research, said. "There's not a lot of conviction about what the second half is going to look like."
Investors are growing increasingly nervous about Apple's growth prospects.
Shares of other chipmakers and Apple suppliers - including Qualcomm Inc(QCOM.O), Avago Technologies Ltd(AVGO.O), Broadcom Corp(BRCM.O) and Skyworks Solutions Inc(SWKS.O) - fell between 2 and 6 percent on Wednesday.
Goldman Sachs analyst Bill Shope said in a note on Wednesday that Apple's momentum could weaken further before it launches new products later this year.
Apple, which relies heavily on new products to drive its revenue growth, has not had a launch since last October when it unveiled its 7.9-inch iPad mini and an updated full-size iPad.
In the past week, analysts had reduced their estimates for Apple's March quarter revenue on average to $42.53 billion from $42.68 billion.
Apple is expected to report a 9 percent increase in quarterly revenue on April 23, with net profit expected to decline 17 percent to $9.59 billion, or $10.08 a share, for its fiscal second quarter, according to average analysts' estimates.
Bernstein Research's Sacconaghi, who lowered his quarterly revenue estimate to $41.1 billion from $42.4 billion, said he expects mixed results with Apple's revenue coming in below consensus and earnings per share largely as expected.
(Additional reporting by Edwin Chan, Faith Hung in TAIPEI, Miyoung Kim in SEOUL, Ayai Tomisawa in TOKYO; Additonal reporting and writing by Mari Saito; Editing by Maureen Bavdek, Andrew Hay, Leslie Adler, Cynthia Osterman and Chris Gallagher)
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