Stifel: Revenue of iPhone assemblers down 4% in Q4

A sign, says Apple bear Aaron Rakers, that iPhone unit sales may disappoint.

In a cryptic note to clients that landed in my inbox Tuesday, Stifel analyst Aaron Rakers spots what he thinks may be a troublesome sign.

In the quarter that just ended the combined revenue of Hon Hai (Foxconn) and Pegatron—the Asian manufacturing giants that assemble, among other devices, all of Apple’s iPhones—was down 4% year over year. He writes:

As we have highlighted in the past, Hon Hai + Pegatron revenue have a high historical correlation to Apple’s product (ex-service) revenue… Our analysis continues to leave us estimating iPhone shipments in the low-70M range, relative to our 76.7M estimate for the December quarter (Street: 77.4M).

In the chart below, Apple iPhone Shipments for calendar Q4 2016 is Rakers’ estimate. How he can offer estimates in both the low 70 millions and the high 70 millions is not clear.

Click to enlarge. Not seeing the chart? Try the website.

Rakers maintains a hold on Apple. In October he lowered his price target to $115 from $130.


  1. Fred Stein said:

    Optical illusion.
    The eye is drawn to the recent top small circles, where correlation seems high. Looking at all the data points, correlation does not seem high.

    January 10, 2017
  2. Gary Morton said:

    We might expect that the iPhone assembler’s revenue is down from Q4 2015. Longer term investors should remember that Apple over-forecasted sales and overbuilt the 6S and 6S Plus in the latter half of 2015. The company had to significantly cut production into 2016. Channel inventories were full by the end of December 2015, and demand was good, but not as good as initially projected. The assemblers benefited in 2015 from the over-build, but then saw seasonally higher cuts in Q1 and Q2 of 2016. The revenue drop in the chart between calendar Q216 vs. Q215 supports this observation. So, sales in the latest quarter down only 4%YoY for the iPhone assemblers does not necessarily correlate to the overall iPhone demand for the last quarter of 2016. These tea leaves are hard to read.

    January 10, 2017
    • Robert Paul Leitao said:


      I agree with you. The tea leaves are not only hard to read, the claimed correlations might also be flawed.

      There’s an underlying assumption the revenue paid per unit by Apple remained static year-over-year. There’s also an assumption both enterprises (Hon Hai and Pegatron) had a similar customer revenue mix in the quarter.

      If one looks at the combined revenue for the two vendors in CQ3 2016, there’s a slight uptick year-over-year for the two enterprises combined despite a year-over-year decline in iPhone unit shipments in the same period. This suggests production in CQ3 2016 may have been higher this year than last year moving some revenue activity forward to the previous quarter.

      Although the graph and claimed correlation are interesting, I don’t have confidence as a forecasting tool to estimate iPhone unit shipments in CQ4 2016 (FQ1 2017) they are valid.

      January 14, 2017

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