Samsung chip supplier AMS warns of customer setback, shares plunge

October 25, 2016 11:03 AM EDT

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By Anna Serafin and Sylwia Lasek

(Reuters) - Austrian sensor chip maker AMS AG has warned of a setback with one of its customers which could hit revenues and force a writedown in its accounts, sending its Swiss-listed shares down by as much as 23 percent on Tuesday.

AMS, which supplies components to smartphone makers Apple and Samsung among others, did not name the company involved in what it called a "customer-specific negative development", but analysts suggested it could be Samsung.

AMS's chips help adjust the brightness and colors on smartphone screens. Samsung scrapped its flagship Galaxy Note 7 phone on Oct. 12 less than two months after the launch after numerous reports of their batteries overheating and catching fire.

The South Korean company did not immediately respond to a request for comment.

"The customer is probably Samsung, (and the product) Galaxy Note 7," said Bryan Garnier analyst Dorian Terral.

AMS Chief Executive Alexander Everke said: "We have that incident that happened recently and the market is still trying to figure out how to react to this".

He told analysts on a conference call that its business with the unnamed customer was for a product of a much higher value than those it had supplied in the past.

Analyst Terral said AMS sensors for the Galaxy Note 7 sold for higher than average prices.

Apple, a bigger customer for AMS than Samsung, is due to report its fourth-quarter results later on Tuesday.

AMS said it expected a further hit to fourth-quarter results from an unspecified production line problem and continuing uncertainty over the strength of demand for its sensors used in the automotive and industrial sectors.

AMS expects fourth quarter revenue to come in at 127-134 million euros, down from 147.2 million euros last year and well below a consensus of analysts' forecasts of around 160 million euros.

AMS said on Monday it would buy Singapore-based optical sensor maker Heptagon, a loss-making company, for $855 million. Shares in AMS were down 10.6 percent at 27 Swiss francs by 1048 ET, off a low earlier in the day of 23 francs.

($1 = 0.9187 euros)

(With additional reporting by Anna Jaworska-Guidotti in Gdynia; Writing by Thyagaraju Adinarayan; Editing by Greg Mahlich)



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