Apple's Friends in Taiwan
Apple's revenue growth has moved in tandem with its five main device assemblers
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 Cupertino. 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 Corp. assemble iPhones. Hon Hai also has a role in other Apple products, splitting MacBooks with Quanta Computer Inc. and sharing iPads with Compal Electronics Inc. Quanta and Compal also make Apple Watches.
Hon Hai and crew can indeed 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 Cupertino for more than half their business, Wistron and Compal are far less dependent on Apple, according to data compiled by Bloomberg. In addition, as hardware mavens, their operations would have no impact on sales of software and services, a significant and growing part of Apple’s top and bottom line.
“It’s true that they are major assemblers of Apple but at the same time they have other customers,” he said in an email.
Investors remain concerned that iPhone sales at Apple, which reports results May 1, 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, when it was propelled by demand for lower-priced and older models like the iPhone 6S and ramp up of the iPhone 7.
“According to our estimates, iPhone X’s production volume fell by 50% in the first quarter compared to the fourth quarter,” said Huang.
Still, the iPhone X’s higher price tag ensured a tidy jump in revenue. For now, analysts are still counting on the first three months this year to have been Apple’s best second quarter ever with an average estimate for $61 billion in revenue. And while its assembly quintet saw sales decelerate during the period, their collective growth is still double that of a year earlier.