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Business

Cheap new iPhone seen hardly helping Apple, parts makers

SILICON VALLEY -- Apple's widely expected budget iPhone for emerging markets, aimed at shoring up earnings at the American technology giant, will likely provide little relief to Japanese parts suppliers.

     The new device is rumored online to have a 4-inch screen, the same size as that of the iPhone 5s, and a camera resolution matching the iPhone 6. While its chips will be the same as those in the current mainstay, the iPhone 6s, other components from older models indicate a focus on price to cultivate demand in emerging economies. Apple is also said to be unveiling a 9.7-inch iPad on Monday at its headquarters here.

     Apple warned this January that sales could drop for the first time in 13 years in the first quarter of 2016. In a teleconference, CEO Tim Cook pointed to slowing emerging-market sales as a big reason. Based on his analysis, adding a lower-priced iPhone to spark growth in demand makes sense even though it departs from the company's successful formula of launching cutting-edge new models.

     But the new phone will likely make only a limited contribution to overall earnings. Goldman Sachs Japan sees the handset's annual sales at around 12 million units -- about 5% of overall sales. At such a level, the low-cost version is not likely to give total output of the iPhone series much of a boost.

     For Japanese suppliers of iPhone parts, "the tough earnings conditions will continue," according to Yasuo Nakane of Mizuho Securities. "Overall production volume won't rise, and increases in the price per unit will be unlikely [because there will be no new features]," Nakane said.

     Earnings estimates for Japanese electronics parts makers seen as having close ties to Apple thus remain largely pessimistic.

     Mizuho Securities sees Murata Manufacturing's group net profit at 171.7 billion yen ($1.53 billion) for the year through March 2017 -- 17% below the brokerage's estimate for the year ending this month.

     Alps Electric will probably suffer a drop in group operating profit in the year through March 2017, according to Hiroharu Watanabe of SMBC Nikko Securities. Alps is said to supply iPhone parts, including an image stabilization mechanism.

     A major update to the iPhone series, slated for the autumn, is expected to include improved camera functionality and a longer-lasting battery. But with such features as wireless recharging and an OLED display said to be put off to future models, this fall's update is again unlikely to help earnings much at Japanese parts suppliers.

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