The Swiss-listed group cut its fourth-quarter revenue outlook by 15 percent and pushed back its medium-term targets, blaming "recent demand changes from a major customer".
AMS, which specializes in sensors, did not name Apple as the customer, but analysts estimate that the U.S. giant accounts for 40 percent of the Austrian group's sales.
Apple shocked investors two weeks ago with a lower than expected sales forecast for the Christmas quarter, prompting suppliers including U.S. firm Lumentum, British chipmaker IQE and screen maker Japan Display to issue warnings that pointed to weakness in new iPhone sales.
Like Lumentum, AMS supplies Apple with software components needed for its FaceID technology.
Anglo-German chip designer Dialog Semiconductor, which struck a $600 million deal with the U.S. tech giant last month bucked the negative trend when it said late on Wednesday it does not see a drop in demand from Apple.
Dialog justified this by pointing out that it supplies many more products than the latest iPhones.
For the past year, investors had largely been willing to overlook stagnating unit sales of the iPhone because average selling prices kept rising. But Apple now faces fierce competition from mid-priced phones from makers such as Xiaomi Corp.
The California-based firm started selling its latest phone generation, the iPhone XS and XS Max in September and the XR model last month.
The new AMS guidance suggested between 11 and 18 million fewer iPhones would be produced in the fourth quarter than an initially estimated 77-82 million, Credit Suisse analysts said in a note to customers.
"This is largely in-line to read from recent Lumentum warning," they said, adding the Lumentum guidance would have implied an impact of 15-20 million iPhones.
AMS shares gained as much as 6.4 percent to 29.65 Swiss francs after a steep drop in early trade.
They have lost nearly 30 percent since Apple's latest earnings release and are down 70 percent since the beginning of the year and some investors see a buying opportunity, said traders.
AMS expects revenue to come in between $480 million and $520 million in the three months to Dec. 31, compared with the $570-$610 million it forecast last month.
The adjusted operating margin for the quarter is expected to reach the low to mid-teen percentage range after previous guidance for the margin to rise to 16-20 percent.
AMS also abandoned its 2019 revenue target of more than $2.7 billion, saying it now expects annual double-digit revenue growth for the coming years.
It still aims for a 30 percent adjusted operating margin but no longer gives a specific time frame. It had already postponed the target to 2020 from 2019 in July, at the time due to order delays from a major customer.
"These guys have no visibility any more," said Mark Taylor, senior sales trader at Mirabaud Securities' Global Thematic Group.
AMS, which has invested heavily in research and development and in production expansion, is now seeking to address underutilized facilities, increasing competition and its reliance on Apple.
Although a number of analysts have cut their recommendations recently, many target price recommendations are still above 40 Swiss francs. "I wouldn't be surprised to see (the stock) rally," said Taylor.
(additional reporting by Helen Reid in London; Editing by David Goodman and Keith Weir)
By Kirsti Knolle