By Kirsti Knolle
VIENNA (Reuters) - Apple (O:AAPL) chip supplier AMS AG (S:AMS) disappointed investors with its fourth quarter forecast, knocking 25 percent off the value of its shares despite the Austrian firm winning deals with other smartphone makers.
AMS shares hit a 20-month low on Tuesday after some analysts questioned whether the chipmaker specializing in sensors could achieve its $2.7 billion 2019 revenue target amid signs of weakening chip demand.
"Fourth-quarter guidance is disappointing," UBS said in a note, while Liberum analysts said they were skeptical about AMS meeting its 2019 revenue target and 2020 operating margin goal.
AMS, which has invested heavily in research and development and in production expansion, is now tackling underutilized facilities, increasing competition and its reliance on Apple.
Analysts forecast 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 achievable.
"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," Everke told an analyst call.
AMS said its third-quarter EBIT (earnings before interest and taxation) rose to $60.2 million, or 13 percent of revenue, from $40.5 million last year thanks to increasing production volumes for a recently launched global smartphone platform.
While 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 a delay of several months, production for Apple appears on track and analysts estimate that AMS's facial recognition sensors are in all three newly launched iPhones.
FACING THE WORLD
To reduce its Apple dependency, AMS has been working on selling sensors to Android customers. This has become more important after the U.S. tech giant struck a $600 million deal with German rival Dialog Semiconductors this month.
Swiss-listed AMS also announced 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 it has started to produce 3D face recognition sensors for two Android customers, including China's Xiaomi (HK:1810), the fourth-biggest smartphone maker.
Huawei's [HWT.UL] new Mate20 Pro phones also use AMS sensors for facial recognition, analysts say, adding the second-biggest smartphone maker to the AMS customer list.
AMS said it had secured a deal for OLED-display sensors, which are thinner and more flexible than LEDs, with a major Asian manufacturer, and is working on sensors that are capable of scanning surroundings in 3D, so-called world-facing 3D sensors, for a major smartphone manufacturer.
After a strategic review, AMS said it plans to reduce its focus on environmental sensors, which detect temperature or moisture, but did not say whether this business would be sold.
That leaves it with three main businesses: optical sensors, such as the ones used in the new iPhones, image sensors for applications in self-driving cars and audio sensors.