Trump's tariffs: IPhone parts maker Murata shares plunge 18%

Murata Manufacturing Co.’s shares dropped 18% on May 1, 2025 marking the steepest decline in 25 years.

This followed the company’s forecast of a 24% net income decrease for the fiscal year ending March 2026.

The Kyoto-based firm attributed the projected profit decline to weakened demand for car and smartphone components, as well as ongoing US tariffs.

Murata President, Norio Nakajima, acknowledged that the forecast did not account for further disruptions from tariffs or market changes.

A 1% drop in smartphone demand could lead to a 5 billion yen (US$34.6 million) revenue shortfall.

Murata’s components are used in major electronics, including Apple and Samsung smartphones.

While the company plans a 50% increase in capital expenditures to diversify production, analysts warn of ongoing risks due to tariffs.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Passive component manufacturers face unique vulnerability in electronics downturn

Murata’s dramatic 18% stock drop highlights the specific challenges faced by passive component manufacturers compared to other parts of the electronics supply chain.

Companies producing passive components like Murata’s ceramic capacitors operate with significantly lower profit margins (around 30%) compared to active component manufacturers like chip companies (approximately 45%), making them more vulnerable to market fluctuations and currency shifts 1.

This profit margin constraint explains why Murata is particularly sensitive to the combination of a stronger yen and potential tariff impacts, as they have less buffer to absorb these pressures compared to semiconductor companies.

Despite forecasting a substantial 24% profit decline, Murata is still increasing capital expenditures by 50%, indicating they’re making strategic investments to diversify production geographically and reduce future vulnerability—a costly but necessary adaptation to the changing trade landscape.

The company’s strong balance sheet with a low debt-to-equity ratio of just 2.32% 2 provides them financial flexibility to make these investments even during a downturn, demonstrating their long-term strategy to navigate structural industry challenges.