Today, well-known Apple analyst Ming-Chi Kuo updated his report, stating that market expectations for 5G millimeter-wave iPhone shipments are too high.
The report believes that due to the impact of the COVID-19 pandemic, the global installation of 5G millimeter-wave base stations is lower than expected. Therefore, we anticipate that the shipments of iPhones supporting millimeter-wave technology in 2020 and 2021 will be approximately 4-6 million units and 25-35 million units, respectively. These figures are below the market expectations of 10-20 million units and 40-50 million units, so Speedtech’s revenue from high-priced components in millimeter-wave iPhones will also be lower than expected.
The report believes that through vertical integration and collaboration with Speedtech, Luxshare Precision’s profitability is expected to improve significantly, but this also means that the profit contribution of vertical integration to Speedtech will be significantly lower than market expectations.
However, the growth of new businesses requires Luxshare Precision to invest substantial capital. Therefore, in the vertical integration between Luxshare Precision and Speedtech (such as AirPods Pro, iPhone, and Apple USB-C data cables), Luxshare Precision will capture most of the profits. When facing Apple’s pricing pressure, Speedtech bears significantly more pressure than Luxshare Precision.
Speedtech’s revenue will grow with Luxshare Precision, but its gross margin/profit/earnings per share growth will be lower than market expectations. It is expected that Speedtech’s year-on-year EPS growth for 2021 and 2022 will be only 15-20% and 10-15%, respectively, which is significantly lower than market expectations of 50-60% and 40-50%, respectively.
Luxshare Precision’s AirPods Pro and Apple USB-C cables have limited market share growth. GoerTek and FIT’s AirPods Pro market share is expected to grow in 2021. In terms of Apple USB-C cables, the market share of Luxshare Precision, Speedtech, FIT, and JAE in 2021 will be similar to 2020.
Apple and Huawei are Speedtech’s main customers. Due to the impact of the US ban, Huawei’s mobile phone competitiveness has declined. Speedtech’s EPS growth may be lower than market expectations.