Here’s How Taiwan’s Stock Market Reacted to the iPhone 11 Launch
Yesterday we covered the US market's reaction to Apple's (NASDAQ:APPL) fall keynote, and the iPhone 11 launch. The prior piece looked at the movement of Apple's stock during and after the keynote, which is a good proxy to determine how much the market believes the new iPhone can drive revenue, and also examined the impact the announcement of Apple TV+'s pricing had on the stocks of other streaming companies.
Now it's time we turned our attention to stocks of Apple's suppliers, which are largely all listed on Taiwan's stock market. The key stocks to look at are Foxconn (TPE:2354), which assembles the majority of Apple's iPhones and Watches, and Largan Precision (TPE:3008) which manufacturers lenses for Apple's iPhones.
Foxconn Stock Not Moved by iPhone 11 Launch
The stock of Taiwan's Foxconn, known formally as Hon Hai Precision Industry, appears to be virtually unmoved by Apple's keynote and the iPhone 11 launch. This is a sign that investors believe the volume of the new iPhone won't be close to that of previous iPhones, given a slowing refresh rate. It doesn't help that a few days before the Apple keynote, research firm IDC released a report forecasting that iPhone shipments are expected to drop by 15% year-over-year in 2019 due to the iPhone 11's lack of 5G support and an overall maturing market.
From the report:
2019 will remain a challenging year for iPhone shipments with volumes expected to drop to 177.9 million, down 14.8% year over year, mostly due to market maturity as well as a lack of 5G devices. However, Apple is likely to deliver 5G handsets later in 2020, which will pick up iOS volumes slightly as it will have an edge over other vendors with a better understanding of 5G market conditions for a much more planned launch.
2020 looks to be the year where 5G begins to ramp up. IDC expects 5G shipments to reach 8.9% of smartphones shipped in 2020, accounting for 123.5 million devices shipped. This is expected to grow to 28.1% of worldwide smartphone shipments by 2023.
Foxconn is also facing a bad wave of PR from New York-based China Labour Watch (CLW) that accused the company of a string of alleged violations at Foxconn’s Zhengzhou factory, known as "iPhone City", mostly relating to the employment conditions of temporary workers. The group accused Foxconn of making its temporary workers, which make up half of Foxconn's workforce during peak production times put in at least 100 overtime hours a month. In addition, the group accused Foxconn of paying its temporary workers less than its full-time staff.
Largan Precision Stock Jumps on iPhone 11 Launch
In contrast to Foxconn's stock, Largan Precision was up nearly 3.3% during the Taipei trading day after the iPhone 11 launch. Largan Precision supplies lenses to Apple, Samsung, and a variety of other vendors. In June, Largan announced record revenue and expansion of its facilities due to orders coming in from Apple for the -- at the time rumored -- triple-lensed iPhone 11.
Largan executives have gone on record to state they expect triple-lensed phones to be the norm for the flagship phone of the future, which means that each flagship sold will now be worth more to Largan compared to years prior when flagship phones only had two, or one, lens. Triple-lensed phones, like the iPhone 11, are going to push more revenue into the supply chain, but they will also come at a higher selling price -- which many analysts believe isn't a barrier for adoption.
The biggest growth area for smartphones, according to Counterpoint, is in the premium segment -- though that's limited to developed markets for now. That being said, the 52% growth in that premium segment is good news for Largan: it shows that there's an appetite for higher-priced devices and thus demand for their lenses.
According to Counterpoint’s Consumer Lens Survey, although users are holding on to their devices for a longer time, they are willing to spend more on their devices.
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