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Why Is Apple (AAPL) Stock Down Nearly 3% Today?

Shares of Apple AAPL were down nearly 3% in morning trading Tuesday after a report detailed a significant drop in demand for smartphone chip suppliers.

According to the Nikkei Asian Review, certain Taiwan-based semiconductor manufacturers are bracing for sharp revenue declines as they are receiving far fewer orders for the second half of the year.

For example, Taiwan Semiconductor Manufacturing Company (TSMC), the exclusive supplier of the A10 chips used in the iPhone 7, is expecting iPhone 6s and iPhone 7 chip shipments for the June to December period to shrink to 70%-80% of the levels reached last year.

"The traditional peak season this year will not be able to compare to the past few years,” a source familiar with the matter told Nikkei.

According to another source, TSMC’s revenue is expected to grow by just 4% year-over-year and its operating profit will likely stay flat. Apple accounts for 16% of TSMC’s total revenue, making it the Taiwanese supplier’s largest client.

At the same time, Pegatron, a Taiwan-based iPhone assembler, is also projecting sluggishness for the remainder of the year. The company’s CEO announced Tuesday that Pegatron is remaining “cautious due to some unfavorable uncertainties.”

Today’s news comes just a couple of weeks after Apple reported its first year-over-year decline in iPhone sales since the initial launch of the device. In the company’s fiscal second quarter, Apple saw iPhone sales fall 16%.

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