Apple Inc. (NASDAQ:AAPL) is expected to launch a larger screen iPhone 6 and a 12”/12.9″ two-in-one device towards the end of 2014, according to a report from Nomura by analysts Anne Lee, James Kim, Eason Hung, Peter Liao and Chris Chang, citing a supply chain survey. Analysts believe that with new products coming in 2014, “some quality Apple supply chain players are worth buying in late-1Q14F.”
Apple careful with iPhone 6 display
Apple’s iPhone 6 is expected to sport a larger display of 4.7-5.5 inch compared to 4 inches in iPhone 5, 5C and 5S. There is a genuine concern if the in-cell technology will be enabled to adapt the larger screen size, but Apple is taking utmost care this time, asking the display makers to send in samples.
Analysts expect a larger sensor and larger aperture for better image quality in the iPhone 6, to be launched in fiscal 2014, which will in turn be beneficial for lens makers. Also, the company is considering the OIS (optical image stabilization) function for 2014F products. If Apple Inc. (NASDAQ:AAPL) decides on adding OIS, Apple’s camera supply chain will be impacted dramatically. The company expects to integrate touch IC and display driver IC in the iPhone 5S itself, but it may not be adopted until fiscal 2014, according to the analysts.
Ahead of rivals
Analysts mentioned in the report that Apple Inc. (NASDAQ:AAPL) has outpaced its rivals by 3 to 9 months by engaging innovations like Touch ID, 64 bit and upgraded iOS. The iPhone maker acquired Authentec in 2012, and now is ruling the roost in easy-to-use Touch ID functions. Also, the company has adopted a 64 bit application processor, plus A7 on iPhone and iPad Air, a milestone in mobile computing.
Other rivals lag behind Apple Inc. (NASDAQ:AAPL) in providing 64 bit AP by at least 6 months, perhaps more for Android-based phones.
The analysts have suggested three factors that can reduce the margin pressure on smartphone markets: differentiation in high-end smartphones, outsourcing for lower costs, and cloud services and accessories.
Take on suppliers
Sub sectors like camera, metal casing and acoustic parts are poised to grow in fiscal 2014 while analysts remain cautious on EMS and FPCB. Catcher has been assigned a Buy rating and analysts have initiated coverage on Casetek, assigning it a Neutral rating based on bullish views of the casing industry.
The report notes that the Apple Inc. (NASDAQ:AAPL) supply chain will bear “sharp inventory adjustment” in the first quarter of 2014 after rapid increase in the last quarter of 2013. Analysts note that share prices of Apple plays “will start to reflect the 2H14F new product cycle in late-1Q14F as, by then, most specs of new products would have been determined.”
Hon Hai is the topmost choice in the EMS segment compared to Pegatron. Hon Hai is expected to be the most dominant supplier for iPhone 6 components and Pegatron has been downgraded to Neutral, citing low demand for the iPhone 5C and the advent of new EMS competition.
Buy ratings have been assigned to Hon Hai, Largan, AAC, LG Innotek and Catcher.
