Trade standoff has Japanese supplier to issue profit warning

Nidec, which works with Apple and others, sees sharp slowdown in demand from China

TOKYO— Japanese component maker Nidec Corp., a bellwether for the global economy as a supplier for Apple Inc. smartphones and other consumer products, slashed its earnings forecast and blamed the U.S.China trade conflict for a sharp slowdown in demand from China.

“I’ve been a manager for almost half a century, but this is the first time I’ve seen such a large single-month drop in orders for us,” said Nidec Chief Executive Shigenobu Nagamori. He said the company had to reduce production at the end of 2018 for Chinese auto and appliance makers by more than 30% because of weak demand.

“What we witnessed in November and December was just extraordinary,” Mr. Nagamori said.

Nidec is the top global supplier of motors used in electronics and also has customers in the car industry. The Kyoto-based company cut its revenue forecast by almost 10% to ¥1.45 trillion ($13 billion) in the year ending March 31. The company also lowered its net profit forecast by about 25% for the year.

The profit warning suggests the global economy is facing turbulence and could presage other disappointing results in the earnings season ahead. Taiwan Semiconductor Manufacuring Co. on Thursday cut its revenue forecast for the first quarter by nearly 22% from the last quarter to between $7.3 billion and $7.4 billion, the sharpest fall in nearly a decade.

The company, the world’s largest contract chip manufacturer and a key iPhone supplier, said it anticipated an “overall weakening of the macroeconomic outlook, including seasonally weaker demand for mobile products and high inventory levels.”

Yaskawa Electric Corp., a Japanese maker of robots used in car factories and other manufacturing plants, also lowered its earnings forecast last week due to weakening demand from China and the semiconductor industry.

The trade conflict between Washington and Beijing, in which both countries are threatening to apply high tariffs on a range of each other’s products, has made many companies worried about the economic and political outlook. Instead of keeping their factories cranking out products full-tilt on the assumption customers will be found, many are decreasing inventory to focus more on cash flow, analysts said. Japanese companies like Nidec and Yaskawa play a key role in China’s export machine by supplying advanced parts and equipment for Chinese factories.

The current sentiment isn’t as bad as during the global financial crisis in late 2008, when the revenue of many companies fell by half, said Morningstar Research analyst Kazunori Ito.

“We shouldn’t be too pessimistic and get too worried about the trade conflict’s impact on the global economy just yet,” he said.

In the 2008 economic slump, almost all industries saw their revenue decline. But Nidec said some sectors today remained strong, including the electric vehicle industry in China.

Mr. Nagamori said he wasn’t worried about the economy and demand for his products in the mid- to long-term, citing an expected boom in demand when the next-generation telecommunications technology known as 5G arrives. The company said it wouldn’t change its investment plans for now.