Apple Suppliers Attract Investors Ahead of iPhone 6 Release
With two larger-screen iPhone 6 models rumored to be released this fall, it is no surprise that many analysts are raising their price targets on Apple (NASDAQ:AAPL) shares in anticipation of the increased revenue. The iPhone represented 57 percent of the company’s revenue in the first quarter of this calendar year, and the highly anticipated screen size upgrades could make the iPhone 6 launch the biggest smartphone launch in Apple’s history.
While the most iPhones Apple has ever sold in a quarter were 51 million units during the fourth quarter of 2013, analysts at the Taiwan-based Topology Research Institute are predicting that Apple will sell as many as 80 million iPhone 6 units in 2014 alone, reports the Economic Daily News.
However, Apple isn’t the only tech company that will benefit from the expected success of the iPhone 6. Reuters reports that many investors are also rushing to invest in Apple’s Taiwan-based suppliers. Besides receiving a direct benefit from Apple’s iPhone sales by supplying the Cupertino, California-based company with components or by assembling devices, suppliers also see a spillover benefit when other smartphone makers try to incorporate identical or similar components that are featured in the latest iPhones.
According to the chief investment officer of Fuh Hwa Securities Investment Trust, John Chiu, Apple’s suppliers also have a size advantage that benefits investors looking for a quick return. “From foreign investors’ point of view, Apple is a very big stock, and that limits the upside potential for earnings growth and share prices,” Chiu said to Reuters. “Relatively speaking, Apple component makers are smaller and their growth potential is bigger. They are more likely to get a re-rating on their stock prices if Apple’s new products are successful.”
Some of the Taiwan-based companies attracting investors’ interest are well-known Apple suppliers like Hon Hai Precision Industry (HNHPF.PK), also called Foxconn, and Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) Foxconn is the world’s largest contract electronics assembler and has historically handled the assembly of Apple’s iPhones. Taiwan Semiconductor Manufacturing Co. produces Apple’s A8 chip that will power the next generation of iPhones.
Others, like Largan Precision, may be less familiar. Largan Precision is a Taiwan-based manufacturer of high-quality lenses for high-end devices like Apple’s iPhone. According to Apple’s latest supplier list, the company uses two separate Largan facilities to make components for its products. Largan shares have climbed more than 58 percent over the past three months as investors hope for a further boost when the iPhone 6 models are released in the fall.
According to Jih Sun Securities Investment Trust fund manager Edward Chao, many overseas investors are simultaneously reducing their exposure to Apple’s rivals as they boost their investment in the iPhone maker’s suppliers. “[R]egional investors are shifting their money to Taiwan’s Apple component makers from Samsung Electronics (SSNLF.PK) and other South Korea stocks as Samsung would suffer most if Apple’s new products are a big hit,” Chao told Reuters.
Besides the expected release of the iPhone 6 in two larger screen sizes of 4.7 inches and 5.5 inches, the next-generation iPhone is also rumored to include a near field communication (NFC) chip, higher-resolution display, and improved battery life. PTT Research analyst Matt Margolis has also uncovered evidence that Apple will begin using sapphire as a protective covering for the device’s screen. The iPhone 6 will likely debut in September; some rumors have pointed to September 19 as the specific launch date.
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