Chip inside iPhone 5 cable is bad news for component firm Volex

Shares lose over 30 per cent as Apple pulls plug, literally

A collapse in the share price of UK component supplier Volex looks unlikely to ease with news that Apple’s iPhone 5 cable has a chip inside – making it difficult for others to replicate without a licence.
The latest smartphone comes with a ‘Lightnining’ plug connector, replacing the 30-pin adapters that date back to early iPods, but at a premium price. Normally that would be good news for component firms like Volex which until now has derived up to an estimated 30 per cent of its revenues from Apple.But last week shares in the London-based component supplier crashed by a third when it warned full year profits and revenues would fall short of expectations, adding that it had been confronted by an “unexpected cut” in volume projections from its largest customer, most likely Apple.

The news immmediately sent Volex’s shares plummeting from a week high of 265p to 172p at close yesterday [21st September 2012], with value similarly wiped off fellow component maker Laird.

Meanwhile making matters worse is the discovery that Apple’s new Lightning cables appear to contain authentication chips inside their ultra tiny housing, probably explaining the high price and making unauthorised third-party cables unworkable.

The processor lies between the USB power pin and the V+ wire, meaning that no power will flow from the USB port into the device without the chips.

According to specialist website gottabemobile.com, the change in design probably reflects a change in Apple strategy too and that, in future, it’s unlikely to allow other companies to produce Lightning cables, or, if it does, will exercise more control over them.

All of which seems like bad news for Volex and even more for billionaire financier Nathaniel Rothschild, whose NR Investments owns nearly a quarter of the firm.