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The Effect Of iPhone X Churn On Component Suppliers: BlueFin Research Identifies Winners, Losers

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The Effect Of iPhone X Churn On Component Suppliers: BlueFin Research Identifies Winners, Losers
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Apple Inc. (NASDAQ: AAPL) is facing some difficulty in selling its latest iPhone device which has broad implications across the company's entire ecosystem, according to BlueFin Research Partners. 

The Analysts

BlueFin Research Partners' John Donovan and Steve Mullane.

The Thesis

Apple's iPhone X churn is proving to be "far different" compared to prior iPhone cycles, as shipments and forecasts have been lowered by more than 70 million units versus original estimates, Donovan and Mullane said in a research report.

Uncertainty relating to future iPhone devices is creating "some concerns" among suppliers who have reason to question "virtually everything" relating to product details, timing, and price, according to BlueFin. 

For the first time. Apple's component suppliers are "unsure of the upcoming lineup this close to launch" and are simultaneously being tasked with reducing component costs by as much as 20 percent annually, the analysts said. 

Related Link: How To Trade The Apple Supply Chain, According To Bernstein

Here is a summary of potential winners and losers from future iPhone releases, according to BlueFin: 

  • Lumentum Holdings Inc (NASDAQ: LITE) will dominate the supply role.
  • Finisar Corporation (NASDAQ: FNSR) is having "major difficulties" finding a 6-inch equipment set, which "opened a window" for II-VI, Inc. (NASDAQ: IIVI).
  • In fact, IIVI's Warren, New Jersey facility could boost production from 200 wafers a week to 450 wafers a week next month, driven by Apple.
  • Bosch's 75-to-85-percent market share in motion sensors and other sensors in the iPhone X is likely to remain unchanged.
  • STMicroelectronics NV (ADR) (NYSE: STM) likely "secured" being a lead supplier for Apple's rear 3D scanner.
  • STM is also working with Apple on a next generation 3-D sensor incorporating quantum dot technologies, but this may be only introduced in 2019.
  • Himax Technologies, Inc. (ADR) (NASDAQ: HIMX) is "making an aggressive appeal" to be included in the ecosystem.
  • STM may have qualified to be a second source to the Broadcom Ltd (NASDAQ: AVGO) solution.
  • LG Display Co Ltd. (ADR) (NYSE: LPL) may have qualified for the 6.5-inch future iPhone panel and BOE "missed the window."
  • Japan Display could be the major supplier for LCD panels.
  • As has likely been the case since January, Intel Corporation (NASDAQ: INTC) won 100 percent of the baseband chip business for future iPhones.
  • Broadcom will likely continue providing WLAN and Bluetooth solutions and likely supply the touch screen controller.
  • The PMIC appears to be an internal Apple solution, which creates uncertainty for Dialog as an option.
  • Aehr Test Systems (NASDAQ: AEHR) appears to have a "steady place" given its ability to produce wafer-level, high density, die burn-in tooling.
  • Cirrus Logic, Inc. (NASDAQ: CRUS) will likely continue supplying audio amplifiers.
  • Samsung has 100-percent exposure to the high capacity 256GB models.
  • Intel and SK Hynix could gain exposure to 64GB models, as Toshiba "clearly had some issues" in 2017.
  • Rumors of a 512-GB option "do not jive" with Apple's focus on lowering costs.

Related Link:

Oppenheimer Lowers Apple Supplier Estimates On Weak iPhone Projections

Photo courtesy of Apple. 

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Sep 2018Bank of AmericaMaintainsBuyBuy
Sep 2018Morgan StanleyMaintainsOverweightOverweight
Sep 2018DA DavidsonMaintainsBuyBuy

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