Clues to iPhone X sales lie in Apple’s five largest partners

By Debby Wu

Investors hunting for clues to the iPhone X’s reception can take a deeper look at its main manufacturing partners. And the latest doesn’t look good.

Apple’s five largest device assemblers reported a sharp slowdown after peaking at the end of last year, suggesting demand for the high-end device may have faded just a quarter after its release.

While Hai Precision Industry, Pegatron, and three other key suppliers reported an 8% rise in their total sales across the March quarter, growth cratered later in the period — a drop that in the past has presaged a downturn for Apple.

The concern is that the iPhone X, while enjoying a customary holiday quarter spike for new-generation Apple gadgets, fizzled out rapidly.

Apple’s costliest smartphone has struggled to draw customers in emerging markets, while competitors from Huawei to Xiaomi roll out more premium phones and dominate China — the US company’s biggest foreign market.

Last week, Morgan Stanley cut its estimate on iPhone shipments by six million, underscoring the growing unease since Taiwan Semiconductor Manufacturing, the maker of iPhone processors, issued a disappointing outlook that triggered a 7% loss in Apple’s value.

Apple’s sales growth bears close correlation with that of its main quintet of assemblers, which depend on the iPhone maker for their own business growth — Hon Hai alone gets about half its revenue from Apple.

While it’s difficult to translate their numbers directly into Apple’s, a look at reported figures since 2016 suggests it’s possible to draw certain conclusions at the general health of the US smartphone titan’s top-line.

The group is responsible for finishing most of Apple’s gizmos: Hon Hai, Pegatron, and Wistron assemble iPhones. Hon Hai also has a role in other Apple products, splitting MacBooks with Quanta Computer, and sharing iPads with Compal Electronics . Quanta and Compal also make Apple Watches.

Hon Hai and crew can offer insights into Apple’s sales but to a limited extent, said Jusy Hong, a director with IHS Markit. While Hon Hai, Quanta and Pegatron both rely on Apple for more than half their business, Wistron, and Compal are far less dependent on Apple.

“It’s true that they are major assemblers of Apple but at the same time they have other customers,” he said.

Investors remain concerned that iPhone sales at Apple, which reports results May 1st, failed to meet their lofty expectations.

Mia Huang, an analyst at Taipei-based research firm Trendforce, estimates that overall iPhone production volumes grew slightly to 54-56 million units in the March quarter — barely up from 52 million in the same period of last year.


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