From a note to clients by Credit Suisse analyst Kulbinder Garcha that landed my inbox Wednesday:
The CS Asia Tech Team has recently published its quarterly smartphone supply chain updates ahead of the new product cycle. Three main conclusions, all point to the upside to our estimates.
- First, our Asia team has noted a slight increase in the overall iPhone production in the second-half of 2017 to 156 million from 145 million, driving the full year production to 241 million from the previous build data of 232 million. We note the production data suggests a 5% upside to our full year iPhone estimate of 229 million.
- Second, the production data indicates 112 million iPhone 8 builds (up 13% year over year) in 2H2017, which implies a material upside to our sell-in unit estimate of 90 million.
- Third, we see two sources of upside for our ASP [average selling price] assumptions – mix of the OLED model and pricing. While the mix of the OLED phone builds has come down slightly to 56% from 60% of the previous check, it is still meaningfully ahead of our assumption of 45%. In addition, we note that Apple has historically raised iPhone prices along with key updates.
Given its affluent user base, a significant feature upgrade, limited price elasticity shown so far, as well as Samsung’s higher pricing points of the S8 devices, we believe our ASP assumptions could prove conservative at $676/$704 for CY17/CY18.
Maintain Outperform and $170 price point.