Apple Inc. reported its first quarterly revenue decline in over a decade in the most recent quarter, and this has impacted Apple’s hardware suppliers. Taiwan also suffered because of this, when in May the foreigners hammered this Apple’s manufacturing backyard, selling over $3.5 billion of stocks, says Barron’s.
iPhone 7 – may not have anything special
Smart money too are not looking interested. Recently, JPMorgan conducted a marketing trip, and found that its clients have written off the upcoming iPhone 7 this fall, and have their focus on the model to be released next year. They wish to know if Apple will make use of Samsung’s organic light-emitting diode, or LED, display technology.
MayBank’s technology analyst – Warren Lau – notes that the iPhone 7 does not have many upgrades, and this is the prime reason for investors’ concern. Apple Inc. holds two-thirds of high-end smartphone market share, and will try to acquire a larger share of the Chinese market, where the Chinese players are its prime rivals.
The iPhone 6S Plus with 128GB is sold at $1,200 in China while Huawei’s newest P9 Plus device is sold for $650 only. Huawei’s device was launched in April, and comes with a faster processor and dual cameras. Lau is bearish on the US firm, and expects it to ship just 196m iPhones this year, representing a 15% decline from 2015.
Preparing for next year
In April, Korean media speculated that Apple and Samsung already entered into a supply contract of OLED screens starting next May. However, it is not known if OLED will be for all the models or just for the big screen Plus. Samsung is the only OLED manufacturer that could commercially deliver OLED for smartphones, and it has already entered 4th-gen manufacturing.
Though Japanese firm invented the LED display concept, the current Apple LED display suppliers such as Japan Display and Sharp are way behind. Meanwhile, Korea’s LG Display is stuck at the large-screen OLED TV stage, says Barron’s.
Apple suppliers – What’s up with them?
Apple Inc. always aims for a bigger profit margin, and this means, the Asian suppliers will take a sales volume and profitability hit. Apple gets its supply of acoustic and haptic, or touch components from AAC Technology, and Lau is suspicious if it will or won’t be able to meet its 20% sales growth target this year.
Lau thinks there will be little industry growth, and says Apple is asking AAC to make a 30% cut in the prices of its existing 3-D touch components. Largan Precision – the camera-lens maker – is the only stock Lau likes, and the reason being, the widening adoption of dual cameras. The iPhone 7 will expectedly have dual cameras, but the flagship devices from rivals like LG and Huawei already have them.
Largan’s revenue saw a 22% decline on year-over-year basis, but possibility exists that in the Q4 it will return to earnings growth and uplift nicely going into 2017, says Lau. MayBank expects Largan’s earnings per share to see a decline of 11% this year, but jump by 34% next year.