Morgan Stanley said that increased Apple iPhone shipments will become a key “sales driver” for the supply chain. The bank said consumers are replacing their iPhones less and less frequently, with an average of once every five years starting at 3.7 years in 2021. But that’s about to change, and Apple Intelligence is expected to become “a key driver of iPhone replacements.” Apple last month announced its Apple Intelligence feature, which is its take on generating artificial intelligence. It will only support the 2023 iPhone 15 Pro Max and iPhone 15 Pro, not the regular iPhone 15, and is said to help drive upgrades to new iPhones when they launch this fall. “Growing iPhone shipments are the real driver of supply chain sales from the second half of 2024, especially after weak shipments over the past two years,” Morgan Stanley said in a July 14 report. The bank predicts that iPhone shipments will reach 215 million units in 2024, and this number will increase by 9% annually to 235 million units by 2025. Danley believes that the main beneficiaries in Asia will include Hon Hai, Largan, Luxshare Precision, Genius, AAC, Foxconn Industrial Internet, etc. This is thanks to their massive revenue from the iPhone. It raised price targets on several stocks in Apple’s supply chain. Here are some of its key beneficiaries. The bank is most optimistic about Taiwan-listed Hon Hai Precision Industry Co., Ltd. due to its dual growth drivers of iPhone assembly and artificial intelligence servers. Morgan Stanley analysts said: “We expect Hon Hai to maintain about 63% of iPhone assembly share due to its short time to market and accelerated production from its new production base in India.” They expect its iPhone assembly share to be around 63% in 2025 Revenue will increase by 13% annually and by 10% in 2026. 70% to 80%. The bank said: “Luxshare Precision remains a good example of driving Apple’s hardware upgrades.” Morgan Stanley’s supply chain check shows that Foxconn Industrial Internet will continue to supply the upcoming iPhone at China’s Zhengzhou and Ganzhou factories The 16 Pro and Pro Max models are available in titanium casing. Morgan Stanley said that, coupled with the company’s “rapid progress” in artificial intelligence data center infrastructure, will drive its profits to increase by 27% year-on-year in 2025 and 14% year-on-year in 2026. Largan Optoelectronics reported first-quarter revenue that was lower than expected, but Morgan Stanley believes this is already a low point. “However, the shipment outlook for 2H24 looks more promising, with more new products in larger sizes and high-end. Therefore, we believe the trough in gross margin will represent an attractive buying opportunity,” the bank said. Morgan Stanley said Genius has a “good chance” to achieve a breakthrough in the field of periscope high-end lenses in the second half of this year. The bank said this could improve its competitiveness. The bank said AAC Technologies could see some “recovery drivers” this year. These include “continuous improvements” in yields and margins for the wafer-level glass lens technology produced by AAC Technologies. —CNBC’s Michael Bloom contributed to this report.
