Six Asian suppliers lifted by the iPhone’s rising tide

From a note to clients by Cowen’s Karl Ackerman that landed in my inbox Monday morning.

(Acronyms unpacked and basis points converted to percentages for easier reading)

The AAPL supply chain continued to perform well in October with sales growing 6% month over month, 1.5% ahead of seasonal (after advancing 4.5% ahead of seasonal in September).

Of the 21 companies we track on a monthly basis in the AAPL supply chain, the original design manufacturing (ODM) and electronics manufacturing services (EMS) makers performed the best vs. seasonal driven by strength at Wistron (~17% above) who shares the iPhone 8+ with HonHai, Compal (~10% above) who makes the Watch, and Pegatron (~6% above) who supplies the iPhone 8 casing.

Hon Hai, the sole electronics manufacturing services (EMS) maker for the iPhone X, advanced slightly below seasonal (~2% below), but it did post a 2-year record high of monthly sales in October.

Outsourced semiconductor assembly and test (OSAT) provider ASE, who supports AAPL on integrated circuit (IC) packaging and system in package (SiP) solutions, advanced ~3% above seasonal. TSMC also reported their highest monthly sales result in October driven by the continuous ramp of A11 system on a chip (SoC), though results were 2% below 5-yr seasonal. Display, metal casings, camera modules, battery packs and other electronic component players all fell well below seasonal in October.

These data trends are important as our analysis indicates robust predictive power for AAPL sales based on overall AAPL supply chain sales on a quarter over quarter basis. Over the last 9 years, AAPL’s revenues have had an 83% correlation and 70% R2 w/ AAPL’s supply chain sales.

My take: Except for giant Hon Hai (Foxconn), these names are new to me.

One Comment

  1. Kathy Corby said:

    TSM is actually widely traded in the US, but checking just now, is up from from 28 to 41 (approximately) year over year, which is about 43%. However, Apple stock is up year over year approximately 68%– 103 to 174. I believe this illustrates the fact that investing in Apple suppliers, although it would seem to be a no-brainer to many, overlooks the fact that Apple is said to squeeze suppliers hard for pricing and other advantages, and thus being an Apple partner is no guarantee of success. In fact, Apple’s supply chain management is (IMHO) second to none and the rise in stock prices partly reflects this expertise. I for one am content that I bought Apple rather than any of its suppliers.

    3
    November 13, 2017

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