AMS Q4 Forecast Disappoints Investors

Apple chip supplier AMS AG disappointed investors with its fourth quarter forecast, knocking 25 percent off the value of its shares in spite of the Austrian firm winning deals with other smartphone makers.

person showing AMS manufactured iPhone

AMS shares reached a 20-month low after some analysts questioned whether the chipmaker specializing in sensors could achieve its $2.7 billion 2019 revenue target amid signs of weakening demand for chips.

“Fourth-quarter guidance is disappointing,” said UBS in a note, while Liberum analysts said that they were doubtful about the company meeting its 2019 revenue target and 2020 operating margin goal.

AMS, which has invested largely in research and development and in production expansion, is now tacking underutilized facilities, increasing competition and its dependence on Apple.

Analysts predict that to reach its 2019 revenue target, AMS needs two or three significant new deals, something that the company’s chief executive Alexander Everke said was attainable.

“We have multiple wins and we do see that growth that you have just described. All the investments we have done… support the growth we indicated for 2019,” said Everke during an analyst call.

AMS said that its third quarter EBIT (earnings before interest and taxation) increased to $60.2 million, or 13 percent of revenue, from $40.5 million last year thanks to increasing production for a recently released global smartphone platform.

Although it does not identify its customers, this was taken as a reference to Apple, which analysts estimate accounts for around 40 percent of AMS sales.

After an interruption of several months, production for Apple appears on track and analysts estimate that AMS facial recognition sensors are in all three newly launched iPhones.

To decrease its Apple reliance, AMS has been working on selling sensors to Android customers. This has become rather more important after the US tech titan sealed a $600 million deal with German rival Dialog Semiconductors this month.

Swiss-listed AMS also revealed new deals on Monday, including two with Asian smartphone producers for its Android time-of-flight solutions, a method where cameras capture a whole scene in three dimensions with a dedicated image sensor.

AMS also said that it has begun to produce 3D face recognition sensors for two Android customers, including China’s Xiaomi, which is the fourth biggest smartphone maker.

Huawei’s new Mare20 Pro phones also use AMS sensors for facial recognition, according to analysts, adding the second biggest smartphone maker to the list of AMS customer.

The chipmaker said that it has secured a deal for OLED-display sensors, which are thinner and more flexible than LEDs, with a key Asian manufacturer. It also said that it is working on sensors that are capable of scanning surrounding in 3D, so-called world-facing 3D sensors, for a major smartphone manufacturer.

After a strategic review, the company said that it is planning to decrease its focus on environmental sensors, which detect temperature moisture, but did not disclose whether the business would be sold.

That effectively leaves it with three main businesses, namely optical sensors, such as the ones used in the new iPhones, image sensors for applications in self-driving cars, and audio sensors.

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