Apple supplier AAC Tech reports first profit decline in four years amid weak smartphone market.
AAC shares fell nearly 11 percent after the company reported that net income fell 39 percent compared to the previous year.
(Reuters)- AAC Technologies, a supplier of acoustic components to Apple, said on Wednesday that net profit fell for the first time in nearly four years, hit by stagnant iPhone sales and a sluggish global smartphone market.
Shares of AAC fell nearly 11 percent after the company reported that net profit fell 39 percent year-on-year to 653 million yuan ($95 million), the first quarterly decline since July-September 2014. Shares later recovered and closed 1,3 percent higher.
“Apple is hitting a plateau in terms of volume this year, and while it has managed to push up product prices and profits, the stagnation in volume is affecting its suppliers,” said Neil Shah, partner at Counterpoint Research.
AAC, which supplies acoustic and tactile components for Apple products such as the iPhone, iPad, and Apple Watch, derives half of its revenue from the US tech giant, according to an estimate by the research and brokerage firm Sanford Bernstein.
While Apple reported better-than-expected results for the quarter ending in June, shipment volumes for iPhones and iPads remained virtually unchanged from the previous year.
AAC's quarterly revenue fell 14,5 percent to 3,79 billion yuan, the biggest drop since 2009, with margins also hit by a stronger yuan.
The company, which is also a supplier to leading smartphone manufacturers, including Huawei Technologies, said that smartphone sales were weaker than expected in the quarter, amid a shrinking global smartphone market.
AAC competes with China's Goertek and the US-based Knowles as one of the world's largest manufacturers of acoustic components. Shah, from Counterpoint, said that the increasing number of products with microphones, such as smart speakers and TVs, represents a greater business opportunity, but the competition is also tough.
By Sijia Jiang