Smartphone Suppliers Are Screaming The Market Has Gone From Bad To Worse

Apple Inc. AAPL investors appear to be preparing for the possibility of declining iPhone sales in the near term. The question that the broader investment community continues to ask is if the prospect of declining smartphone sales is a problem related only to Apple or is it an industry-wide issue.

One of the first steps in evaluating the state of the smartphone market is to turn toward key members of the supply chain. According to Bloomberg, Asian component makers are "positioned early in the supply chain so they often signal what's ahead" for the large manufacturers.

Can it be that bad?

Related Link: Eunice Yoon Breaks Down Apple's China Problem

Bloomberg noted that smartphone component suppliers in Asia are issuing concerning earning reports and guidance. Pegatron, an assembler of iPhones, missed its profit expectations; the company attributed the miss to April sales from Apple falling 16 percent.

Minebea Co., a maker of LED lights for smartphones, reported revenue and earnings that fell short of management's own guidance. Japan Display Inc, a supplier of screens to Apple and other smartphone manufacturers, cautioned that it will lose money during the current fiscal year and needs to suspend a proposed dividend to shareholders.

Bloomberg suggested that after many years of strong growth and adoption, smartphones are no longer considered a novelty and many brands are vying to compete in the mid and low-price ranges. This is a market where consumers typically don't upgrade their phones as often compared to high-end users.

Meanwhile, China's smartphone market is heading toward "an epic shakeout" after years of "phenomenal growth."

"The smartphone industry will continue to slow down this year," Richard Ko, a Taipei-based analyst at KGI Securities Co. told Bloomberg. "Competition will worsen and prices will likely continue to fall."