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Electronics

Apple suppliers keep Taiwan's tech sales growing

Foxconn loses iPhone 8 orders to smaller rival as competition heats up

Apple has slashed its production target for the iPhone X in half to around 20 million units for the current January-March quarter.   © AP

TAIPEI Apple suppliers are keeping Taiwan's tech sales on an upward trajectory despite a slowdown in the smartphone market, with 19 companies tracked by the Nikkei Asian Review logging increased revenue in January.

Combined sales for the 19 companies rose 13.28% on the year to 953.4 billion New Taiwan dollars ($32.5 billion). But while this marks the 14th consecutive month of year-on-year growth, it is also a decline of 23.1% from the NT$1.24 trillion logged in December. That figure was the highest monthly revenue since January 2013, when listed companies in Taiwan began to adopt international financial reporting standards.

Of the nine Apple suppliers on the list, eight reported year-on-year growth in January sales. Together, the nine generated a total of NT$790.84 billion in revenue, up more than 13% on the year but down 26% from the peak of NT$1.06 trillion in December.

Analysts attributed the nine companies' year-on-year revenue increase mainly to higher prices for the iPhone X and the iPhone 8 range compared with the iPhone 7 series, even though demand for the premium iPhone X handset has been weaker than expected.

The iPhone 7 was priced at $649 and the iPhone 7 Plus at $769 when they were introduced in 2016, while prices for the iPhone 8, iPhone 8 Plus and iPhone X started at $699, $799 and $999, respectively.

"The higher average sale price helped Apple suppliers' revenue look better than the previous year, but we are not sure whether the profit margin is also higher," said Jeff Pu, an analyst at Yuanta Investment Consulting.

"Meanwhile, the interesting point is that we are seeing relatively good demand for older models, such as the iPhone 7 range, this year," Pu added. "In previous years, new models [would] significantly outsell older models, but many consumers now are apparently looking for better deals this year rather than just buying the latest models."

Apple has halved its production target for the iPhone X to around 20 million units for the current January-March quarter, according to sources. The company had originally envisaged producing more than 40 million units during the first quarter when it released the iPhone X last November.

The shift in demand for different iPhone models has significant implications for individual Apple suppliers.

Major iPhone assembler Hon Hai Precision Industry, better known as Foxconn Technology Group, saw its revenue increase 16% to NT$400.6 billion in January from a year earlier, mainly due to the higher price tag on the iPhone X. But Foxconn's January sales declined more than 40% from December.

Foxconn's two smaller rivals Pegatron and Wistron saw their revenue climb 35.8% and 45.18%, respectively, on the year in January, a traditionally slow month.

Pegatron's revenue was boosted by relatively robust demand for the less expensive iPhone 7, while Wistron began snagging iPhone 8 Plus orders from Foxconn last month. Wistron is not included in the Nikkei Asian Review's list.

Pegatron makes the smaller and less costly versions of the iPhone 8 and 7, while Wistron manufactures the iPhone 8 Plus and the more affordable iPhone SE.

The two companies could gain more orders from Apple this year as the U.S. company continues to diversify its suppliers, said Kylie Huang, an analyst at Daiwa Capital Markets.

Catcher Technology, which makes metal casings and metal frames for Apple, reported a more than 68% surge in sales in January from a year earlier thanks to strong demand for the iPhone 7. Catcher also snagged market share from Foxconn's casing unit, which makes metal frames and assembles them with glass backs for the iPhone 8 Plus.

Taiwan Semiconductor Manufacturing Co., the sole supplier of iPhone core processor chips, saw its January revenue increase more than 4% on the year to NT$79.74 billion. Advanced Semiconductor Engineering, a chip packaging and testing partner of Apple, reported a sales increase of nearly 4% in January.

Nikkei staff writer Chien Chia-Hung contributed to this report.

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