Asian companies get big slice of Apple’s pie

A production line in the Longhua Science and Technology Park, also known as Foxconn City, in Shenzhen, China. Source: Supplied

PREPARATIONS for the rollout of Apple’s latest iPhones are rippling through Asian economies, boosting revenues at component makers and helping underpin electronics exports from some ­nations.

The company is asking suppliers to manufacture up to 80 million units, about a third higher than initial orders last year for the iPhone 5S and 5C, according to sources. Apple is expected to launch two larger iPhone models this year and has been sourcing parts from across Asia ahead of the start of production next month, they say.
Apple hasn’t publicly named the suppliers and didn’t respond to requests for comment. But analysts expect companies from Taiwan, Japan and South Korea that supplied earlier versions of the iPhone to produce key components such as displays, camera lenses and microprocessors.

Already, some of those companies are announcing increased earnings or forecasts, and economists and analysts are talking about an Apple effect on whole sectors and economies.

Asian suppliers have other smartphone customers, so they are benefiting from general growth in the smartphone market. But for a number of the companies, Apple is the biggest customer. In Japan, one government official estimated the new iPhone could raise quarterly ­demand for the country’s ­electronics exports by 5 per cent.

Taiwan’s export orders, an early indicator of actual exports, were at their strongest in 17 months in June. Industrial production in June, figures for which were released this week, was up 8.6 per cent on the previous year, above expectations, led by double-digit gains in semiconductor output, which some analysts put down to increased Taiwanese supply to Apple.

“The jump of the output of semiconductors is 100 per cent related to the iPhone launch,” said Masterlink Investment Advisory economist Anita Hsu.

The region’s iPhone bonanza shows why Apple is such an important presence in Asia. Few single tech manufacturers control such production volume.

Japan Display and LG Display of South Korea have been the largest suppliers of displays. Catcher Technology of Taiwan has produced the phone’s metal casing, another expensive component. Largan Precision, also of Taiwan, made camera lenses. South Korea’s Samsung Electronics has furnished memory chips and microprocessors, the phone’s computing brains.

Hon Hai Precision Industry and Pegatron, both Taiwanese-based companies, previously have assembled iPhones in their Chinese factories. Apple also is leaning on some new suppliers, including Taiwan Semiconductor Manufacturing. The company began shipping microprocessors to Apple in the second quarter. None of the suppliers would comment on their relationship with Apple.

Catcher reported record-high revenue in June, and Largan posted its second-highest monthly revenue on record in the month. Taiwan Semiconductor Manufacturing in July forecast a strong third quarter after reporting record second-quarter earnings due to strong demand for its microprocessors.

Previous launches of the iPhone have boosted large swathes of Asia’s electronics supply chain. The 5S cost Apple about $US200 ($210) in materials per phone. The most expensive components are the display and casing, both more than $US40 each. The phone retails for more than $US600 without a contract.

The Wall Street Journal