iPhone supply chain builds: Good, but not yet a ‘super cycle’

From Cowan semiconductor analyst Karl Ackerman’s monthly survey of 21 companies in Apple’s supply chain:

Final iPhone builds for CQ4:17 held up well in the context of consensus expectations, underscored by above seasonal performance for CQ4 from 21 Taiwanese companies across the AAPL supply chain. However, we continue to think our near-term cautious stance for CQ1:18 is valid as our field work reveals less of a mix tailwind from new iPhones vs. 30 days ago…

CQ4 iPhone units have held up well and are unchanged from our prior view last month of 83MM units (+10% Y/Y), supporting sell-in estimates of ~79MM units. For CQ4:17, the mix has also remained constant from our last note (see Figure 1 & 2) w/ the latest iPhone models (8/8 Plus and X) up 8% Y/Y vs. the 7/7 Plus.

apple supply chainClick to enlarge.

As the AAPL supply chain begins to prepare in earnest for CQ1:18, our third round of supply chain checks for CQ1 supports an unchanged iPhone build expectation of 56MM units. These build #s are still below consensus expectations of ~60MM units. Relative to just 30 days ago, we are witnessing less of a mix tailwind for RFFE suppliers as units of the iPhone X are being curtailed to 29MM units from 34MM in favor of the iPhone 7/7 Plus. Thus, the latest iPhone models (8/8 Plus and X) in CQ1:18 are up 3% Y/Y vs. the 7/7 Plus. When looking at CQ4:17 and CQ1:18 on a combined basis, the mix of this generation’s iPhones vs. last year (8/8 Plus and X vs. 7/7 Plus) are up 6% Y/Y – good, but not yet indicative of a “super cycle.”

My take: How Ackerman can estimate the mix of iPhone builds from the results of 21 companies that have other clients besides Apple is beyond me.

2 Comments

  1. Gregg Thurman said:

    All things have a beginning. Changes in the norm take time to recognize.

    FY2018 is the beginning of a Supercycle, it will be a superb year for Apple. The Supercycle won’t be evident until January earnings 2019, when Apple reports significant growth in iPhone ASP.

    Over the next 4 years iPhone ASP will grow about $100 as OLED iPhones filter down through the iPhone product line up, pushing LED iPhones out of the mix.

    With nominal units sold growth of about 2% YoY over that 4 year period Apple will experience dramatic revenue growth.

    The best part, from an investor’s point of view, is that the rise in iPhone ASP will occur without the consumer noticing because Apple doesn’t have to increase current pricing to achieve it.

    0
    January 12, 2018
  2. David Drinkwater said:

    I think this discussion also overlooks the fact that the Chinese New Year is relatively late this year, so a lot of that shopping may not have happened yet. I think Apple will be fine.

    And in agreement with Gregg above “changes in the norm take time to recognize” – especially for “analysts”.

    Apple broke the mold with the iPhone, and that took quite a while to stabilize (one year was longer than many (myself included) expected to wait for the 3G (my first iPhone). The roll-out to Verizon complicated things:

    June ’07, July ’08, June ’09, June ’10, VZ February ’11, October ’11, September ’12, ’13, ’14, ’15, SE March ’16, September ’16, (8/8+) September ’17, (X) October ’17, … ???

    The timing pattern (and even really the direction) is not 100% stable, but it is generally very clearly upward and wider. That’s definitely directionally correct.

    0
    January 13, 2018

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