INVESTORS hunting for clues to the iPhone X’s reception can take a deeper look at its main manufacturing partners. And the latest doesn’t look good.
Apple, Inc.’s five largest device assemblers reported a sharp slowdown after peaking at the end of last year, suggesting demand for the high-end device may have faded just a quarter after its release.
While Hai Precision Industry Co., Pegatron Corp. and three other key suppliers reported an 8% rise in their total sales across the March quarter, growth cratered later in the period — a drop that in the past has presaged a downturn for Apple.
The concern is that the iPhone X, while enjoying a customary holiday quarter spike for new-generation Apple gadgets, fizzled out rapidly. Apple’s costliest smartphone has struggled to draw customers in emerging markets, while competitors from Huawei to Xiaomi roll out more premium phones and dominate China — the US company’s biggest foreign market. On Friday, Morgan Stanley cut its estimate on iPhone shipments by 6 million, underscoring the growing unease since Taiwan Semiconductor Manufacturing Co., the maker of iPhone processors, issued a disappointing outlook that triggered a 7% loss in Apple’s value over the past three days.
Apple’s sales growth bears close correlation with that of its main quintet of assemblers, which depend on the iPhone maker for their own business growth — Hon Hai alone gets about half its revenue from Cupertino. While it’s difficult to translate their numbers directly into Apple’s, a look at reported figures since 2016 suggests it’s possible to draw certain conclusions at the general health of the US smartphone titan’s top-line.
The group is responsible for finishing most of Apple’s gizmos: Hon Hai, Pegatron and Wistron Corp. assemble iPhones. Hon Hai also has a role in other Apple products, splitting MacBooks with Quanta Computer, Inc. and sharing iPads with Compal Electronics, Inc. Quanta and Compal also make Apple Watches.
Hon Hai and crew can indeed offer insights into Apple’s sales but to a limited extent, said Jusy Hong, a director with IHS Markit. While Hon Hai, Quanta and Pegatron both rely on Cupertino for more than half their business, Wistron and Compal are far less dependent on Apple, according to data compiled by Bloomberg. In addition, as hardware mavens, their operations would have no impact on sales of software and services, a significant and growing part of Apple’s top and bottom line.
“It’s true that they are major assemblers of Apple but at the same time they have other customers,” he said in an e-mail.
Investors remain concerned that iPhone sales at Apple, which reports results May 1, failed to meet their lofty expectations. Mia Huang, an analyst at Taipei-based research firm Trendforce, estimates that overall iPhone production volumes grew slightly to 54-56 million units in the March quarter — barely up from 52 million in the same period of last year, when it was propelled by demand for lower-priced and older models like the iPhone 6s and ramp up of the iPhone 7.
“According to our estimates, iPhone X’s production volume fell by 50% in the first quarter compared to the fourth quarter,” said Huang.
AMS AG — which makes the optical sensors that control brightness and color — became the latest Apple-supplier to cast doubt over the gadget’s reception. Its shares tumbled after warning on negative operating margins because of low production capacity at its Singapore factories, which Baader Helvea AG analyst Guenther Hollfelder said suggested lower iPhone X volumes than anticipated.
Still, the iPhone X’s higher price tag ensured a tidy jump in revenue. For now, analysts are still counting on the first three months this year to have been Apple’s best second quarter ever with an average estimate for $61 billion in revenue. And while its assembly quintet saw sales decelerate during the period, their collective growth is still double that of a year earlier. — Bloomberg

FACEBOOK, Inc. said it was able to remove a larger amount of content from the Islamic State and al-Qaeda in the first quarter of 2018 by actively looking for it.
The company has trained its review systems — both humans and computer algorithms — to seek out posts from terrorist groups. The social network took action on 1.9 million pieces of content from those groups in the first three months of the year, about twice as many as in the previous quarter. And, 99% of that content wasn’t reported first by users, but was flagged by the company’s internal systems, Facebook said Monday.
Facebook, like Twitter, Inc. and Google’s YouTube, has historically put the onus on its users to flag content that its moderators need to look at. After pressure from governments to recognize its immense power over the spread of terrorist propaganda, Facebook started about a year ago to take more direct responsibility. Chief Executive Officer Mark Zuckerberg earlier this month told Congress that Facebook now believes it has a responsibility over the content on its site.
The company defines terrorists as nongovernmental organizations that engage in premeditated acts of violence against people or property to intimidate and achieve a political, religious or ideological aim. That definition includes religious extremists, white supremacists and militant environmental groups. “It’s about whether they use violence to pursue those goals.”
The policy doesn’t apply to governments, Facebook said, because “nation-states may legitimately use violence under certain circumstances.”
Facebook didn’t give any numbers for its takedown of content from white supremacists or other groups it considers to be linked to terrorism, in part because the systems have focused training so far on the Islamic State and al-Qaeda.
Facebook has come under fire for being too passive about extremist content, especially in countries like Myanmar and Sri Lanka where the company’s algorithm, by boosting posts about what’s popular, has helped give rise to conspiracy theories that spark ethnic violence. People in those countries told the New York Times that even after they report content, Facebook may not take it down. — Bloomberg