Posts Tagged ‘TSM’

September 9 2014 is the biggest day in Apple’s history — the announcement of new iPhone 6, 6 Plus, Apple Pay, Apple Watch, iOS 8, iHealth apps, and many new features and apps. People even comments the Apple Watch is the next big thing after iPhone.   If you miss it, you can watch recap here – link.

2014-09-09 iphone 6 pic

3 Important Moments For Investors

As a professional investor, I bought Apple stocks multiple times when its post-stock-split price hovered about $57-$78 a share and sold it multiple times as well after each peak. What interests me most is the supply chain impact because of Apple’s products.

Investors usually “buy the rumors (hype) and sell the news (event)”. Ahead of the big event there are those who are flashing back 2012 when Apple shares sprinted higher ahead of the release of the original iPhone 5. Apple shares peaked on almost exactly the day of the release then collapsed by almost half over the next six months. Even today the market cap of Apple is lower than those heady days (though the stock price is higher… buybacks make up the difference).

This trading pattern manifests itself in these 3 important moments from Apple (1) new iPhone announcement, (2) iPhone pre-order number news, and (3) when we receive iPhone in our hands. On the last step, companies like iFixit would normally fly to Australia to get their hands on new iPhone, tear it down (disassemble) into pieces to check which suppliers are used in the new iPhone. Speculative investors would pay to get the first hand information.

2014-09-09 iFixit iphone 5s teardown

Nowadays, leaked information flows faster than ever, many reporters had shown and written about mobile payment, health, fitness app and Apple Watch a week or even months earlier than the new iPhone announcement.  For example, 3 days before the Sept 9th official announcement, Techcrunch reported (link) that China Telecom might violate the contract to put a iPhone 6 pre-order page on their website. I guess that’s why Apple pulled China out at the last minute from the list of countries in the first launch.

2014-09-09 AAPL China telecom leak

Winners in the Supply Chain

Apple continues to demonstrate its unparalleled control of product ecosystem. Apple launched the first payment truly leveraging its hardware (NFC + Fingerprint). This is really a negative news for Square, EBAY’s PAYPAL, and other mobile payments startups.

In terms of winners, iPhone 6′ 5.5-inch optical image stabilization comes from the Japanese listed company 6770.tyo (ALPS), NFC chips are NXP Semiconductors (NXP). Both are iPhone’s new suppliers.

The stealth winner is InvenSense (INVN) which provides all the tracking software, accelerometers and gyroscopes in the iPhone 6.  The market rumor started last year from iPhone 5S but INVN was excluded in the final time trial production. This year iPhone6 ​​and Apple Watch, iPad, iPad mini will at least boost a hundred million to the INVN new shipments. INVN is also a supplier to Samsung phones that use optical image stabilization. INVN successfully breakthroughs in several markets simultaneously.

Broadcom (BRCM) draws roughly 28% of their mobile revenue from selling Wi-Fi chips and touch controllers to Apple. High chance that Apple will switch from 802.11n chip to a little bit more expensive 802.11ac chip in iPhone 6. (yet to see at tear-down)

Apple’s “A-series” chips (application processors), baseband inside iPhone 5 is done by Samsung since 2012.  It’s addictive not to think that Apple will transition to Taiwan Semiconductor (TSM) for the manufacture of its application processors. Risk is that Samsung has more mature and advanced 14-nanometer manufacturing technology (i.e. thinner/smaller). If not, TSM will gain significant share with iPhone 6

GT Advanced (GTAT) disappointed many investors that it will only supply sapphire glass display for Apple Watch but not on the 5.5 inch iPhone 6. Its share price plunged 12% on Sept 9th. The drop attributes to the fact that Watch release date is postponed until next year. Initial shipment is expected around 3M to 5M for Watch in 2015 Q1.  Also, online heated debate between Corning’s Gorilla Glass vs. GTAT’s Sapphire Glass pined down the net benefits of using sapphire (link).  IMO, GTAT sell-off is overdone especially because Apple has already invested $500M in GTAT to build 200 furnaces to produce sapphire. Even though the Apple Watch initial shipment is small and delayed, GTAT should be a “hold” given that it is a major supplier of sapphire and the volume is expected to increase due to higher demand of Watch.

Apple Watch Creates New Ecosystem

2014-09-09 AAPL iWatch

The new Apple Watch platform, the new big data is many entrepreneurs’ paradise. Once again, Apple creates a new ecosystem.  It opens up lots of possibilities, a new entry to mobile data for app developers to explore new applications among social, personal location, and healthcare. For example, emergence of Apple Watch is very positive for search service provider such as Google, Baidu (search, maps), YELP, Twitter, public comment and apps based on mobile end personal location service provider. My only concern is the battery standby time.

Apple Watch is a real threat to many emerging wearable bracelet manufacturers and to many $ 400 or higher watches manufacturers. Apple Watch appeared to prove that the era of wearable smart devices coming true. The Watch also plays the role of industry standards. Apple has ecosystem advantage that will give a two-year lead time for Apple to beat Google and Samsung.

Should You Buy Apple Stock Now?

If you own Apple stocks, you should stick with AAPL despite a potential sell-on-the-news reaction.  iPhone 6 is a big jump from iPhone 5 with its new hardware and features. Optimism around the iPhone 6 is running high given Apple’s user loyalty and installed base of more than 300 million iPhones, which could drive a big upgrade cycle. The larger screen size may also help to regain lost market share to Android.

2014-09-09 AAPL stock chart

If history hold truth, Apple stock price peaked roughly on iPhone 5 debut in 2012 and fell in the next 6-9 months. 5S and 5C launch was perceived to be a disaster. However I believe this time is different. Both iPhone 6 and Watch are big game changers. Some believe that these may bring lots of would-be Samsung fans to switch to the newest and cool stuff on the earth.

What have announced at the launch event yesterday (Sept 9th) is tracking what we expected from the leaked information. So if you haven’t bought any Apple stock, it’s wise to wait until we see the pre-order number news. If there is a lot of surprises on the upside, Apple stock price will definitely move to a new high around $120 level. You can still make a good 5-10% profit by riding the tide from current closing price of $98 .

Bonus: Interesting Fact — iPhone 6’s Impact on China GDP

Economists predict that because of iPhone 6, China’s GDP will increase by 1% this year and Taiwan’s GDP will increase by 2%. Almost 30% of the parts inside an iPhone are sourced from Taiwan suppliers and shipped it to Foxconn assembly plants in China mainland. In terms of economic $ value created by iPhone for China is about US$6-7 (net of import/export) and in Taiwan, $24-28.


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