Pegatron and Wistron: Exposure to Apple
In the previous part of this series, we saw that Foxconn is likely to be the sole manufacturer of Apple’s (AAPL) iPhone 8 due to its long-time experience in the assembly space. That will likely boost the manufacturer’s revenue in 2017.
Analysts expect Pegatron, Apple’s other major contract manufacturer, to manufacture the iPhone 7s and iPhone 7s Plus models. They expect Wistron to manufacture older iPhones since it is new in the assembly market.
Pegatron and Wistron are expected to earn 55.0% and 25.0% of their revenues, respectively, from Apple in 2017. JPMorgan’s head of Taiwan equity research, Gokul Hariharan, told CNBC that Pegatron’s and Wistron’s revenues will continue to move according to the iPhone product cycle in the short term.
Specialized suppliers less affected by Apple’s orders
While contract manufacturers will continue to depend largely on Apple for revenue, specialized suppliers—memory and camera module suppliers—are well hedged against a slowdown in the iPhone demand.
For instance, Samsung (SSNLF) and Micron Technology (MU) supply memory to a large number of smartphone vendors. So they’re not impacted by sales of one particular smartphone vendor. They’re impacted by an overall increase or decrease in global smartphone sales.
Apple’s other component suppliers
All Apple suppliers and contract manufacturers have started preparing for the upcoming new iPhone models. Some sources say that Foxconn, Winstron, and Pegatron are recruiting and training new workers in China (FXI) to start mass production of the iPhone 8. Miniature acoustic systems supplier AAC Technologies is ramping up production. Citi expects AAC to earn up to 40.0% of its revenue from Apple in 2017.
According to several media reports, Samsung Display has signed a two-year supply agreement with Apple under which it will supply up to 92.0 million curved OLED (Organic Light Emitting Diode) panels for the iPhone 8.
A report from The Investor stated that LG will supply the 3D (three-dimensional) front camera with facial recognition feature for the iPhone 8. The supplier is expected to build a camera manufacturing plant to meet a large number of orders from Apple.
Next, we’ll see how the iPhone 8 could impact Taiwan Semiconductor Manufacturing’s (or TSMC) (TSM) earnings.