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Apple to diversify manufacturers for low-cost and legacy iPhones

post #1 of 27
Thread Starter 
A fresh report from KGI analyst Ming-Chi Kuo on Tuesday predicts Apple will tap manufacturing partner Pegatron to build a majority of orders for the rumored low-cost FDD-based iPhone, as well as more than half of all legacy iPhone 4 and iPhone 4S orders, in a move to diversify suppliers.

While Apple has long used Hon-Hai, better known as Foxconn, for the bulk of its manufacturing needs, Kuo believes that Pegatron could become a major contributor to the Cupertino company's important iPhone business. For 2013, the analyst estimates Pegatron will be responsible for 75 percent of low-cost iPhone orders and 55 percent of iPhone 4 and 4S production.

Weighting
Source: KGI Securities


Apple will continue to rely on Foxconn for most of its iPhone needs, including all production for the FDD-LTE and TDD-LTE iPhone 5S, low-cost TDD-LTE iPhone and continuing current generation iPhone 5. The firm will also take a 25 percent share of orders for the low-cost FDD-LTE iPhone and a 45 percent stake in W-CDMA and CDMA iPhone 4 and 4S models.

Kuo sees Pegatron benefitting more from Apple's 2013 iPhone plans as its ODM/OEM weighting will get a 9 percent boost to 27 percent this year, up from 18 percent in 2012. He goes on to explain that iPhones using FDD technology will be released earlier that TDD handsets due to licensing and testing restraints. All said, Pegatron's iPhone ODM/OEM weighting could exceed 30 percent in 2014.

The Shanghai company has reportedly been moving manufacture of other brands' products off assembly lines to accommodate Apple's massive iPhone orders. The plants are also said to become dedicated to building Apple products in the future.

The analyst reiterated his prediction of a second half launch for both the iPhone 5S and low-cost iPhone, estimating shipments to reach 35.8 million and 53.4 million units by year's end, respectively. Including ongoing sales of the current iPhone 5, iPhone 4S and iPhone 4, he forecasts Apple handset shipments to soar 83 percent to 110 million units compared to the first half of 2013.
post #2 of 27
I wonder if Wall Street is ever going to catch on to the fact that 97% of the rumors about Apple are totally false.
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Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
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post #3 of 27
Quote:
Originally Posted by jragosta View Post

I wonder if Wall Street is ever going to catch on to the fact that 97% of the rumors about Apple are totally false.

 

I used to look forward waking up and seeing what AAPL would do. Now, I'm afraid constantly. I just pray Apple has enough smart people to turn this thing around! I have faith that they do.

post #4 of 27

I'm going to diversify, too. I will never buy a Samsung product!

 

I know, I know, there are "currently" Samsung parts in my iPhone and iPad...but, I will never buy a Samsung TV, DVD player, camera or appliance.

 

And the same goes for Google....Hurry up Apple and design your on Search Engine! :)

 

Best

post #5 of 27
I wonder if Pegatron and Foxconn use all the same component suppliers. If not, some analyst doing checks of a subset of the supply chain could misinterpret this change in weighting between the two manufacturers as a decrease (or an increase) in total production of iPhones.
post #6 of 27
97% of rumors WERE false under SJ. The percentage of correct ones under Cook, especially the ones that keep cropping up over and over are much higher. Look at the iphone 5 and ipad mini rumors/leaks.
post #7 of 27
The numbers in the article do nit add up

Apple will ship about 80 million units fist half. 83% rise in 2nd half is only 67 million units

What am I missing?

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post #8 of 27
Quote:
Originally Posted by gwmac View Post

Of course they are. Who do you think starts them.

 

A cheaper iPhone for developing countries not to mention pre-paid customers lacking a big subsidy makes sense. I have no idea if the rumor is true or not but financially it certainly seems a very logical step not unlike the iPad Mini, the iPod shuffle and nano. 

 

No reason why Apple can't do extremely in the cheaper segment thus ensuring those people are likely to upgrade to the more premium version later down the road. 

Good points. I remember Apple coming out with the iPod (not the first MP3 player on the market, by far) and, eventually, commanding something north of 75% of the market.

 

And then, much later, coming out with the flash-based Shuffle and "by the following Friday," commanding something north of 75% of the flash-based MP3 market.

 

So it's not unheard of! :)

post #9 of 27
I think I found my math mistake. So, is he projecting ~ 148 million units in 2nd half (calendar)? That would be a HUGE increase in volume. It would shift the landscape
Quote:
Originally Posted by Red Oak View Post

The numbers in the article do nit add up

Apple will ship about 80 million units fist half. 83% rise in 2nd half is only 67 million units

What am I missing?

Windows survivor - after a long, epic and painful struggle. Very long AAPL

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Windows survivor - after a long, epic and painful struggle. Very long AAPL

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post #10 of 27

There are consistent rumors over low cost phones, yet little commentary on things like prepaid plans or Apple's performance in any area that lacks subsidies.

post #11 of 27
Quote:
Originally Posted by greendisease View Post

I used to look forward waking up and seeing what AAPL would do. Now, I'm afraid constantly. I just pray Apple has enough smart people to turn this thing around! I have faith that they do.

To turn what around? Appease the stockholders and in turn ruin the brand.
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post #12 of 27
Quote:
Originally Posted by greendisease View Post

I used to look forward waking up and seeing what AAPL would do. Now, I'm afraid constantly. I just pray Apple has enough smart people to turn this thing around! I have faith that they do.
post #13 of 27
Quote:
Originally Posted by jpvn View Post



i hope so too
post #14 of 27
WS headline: Apple desperate, expands production. /s
post #15 of 27
Quote:
Originally Posted by Red Oak View Post

I think I found my math mistake. So, is he projecting ~ 148 million units in 2nd half (calendar)? That would be a HUGE increase in volume. It would shift the landscape


I think it's extremely unlikely. As the numbers get larger, the percentage increases get smaller, too. I don't think that number is at all plausible.

It's just part of the game. Throw out ridiculous numbers that Apple couldn't possibly hit and then when Apple fails to hit them, complain that they missed their target - and dump the stock.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
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post #16 of 27
I did more math... It would assume Apple is going for 5 to 6% unit market share point increase. So, an increase from around their current 20% to 25%

I like that as a goal. I think it is ambitious and achievable. And if they hit it, it would have tremendous impacts. Apple's profit share would climb above 75%

Quote:
Originally Posted by jragosta View Post

I think it's extremely unlikely. As the numbers get larger, the percentage increases get smaller, too. I don't think that number is at all plausible.

It's just part of the game. Throw out ridiculous numbers that Apple couldn't possibly hit and then when Apple fails to hit them, complain that they missed their target - and dump the stock.

Windows survivor - after a long, epic and painful struggle. Very long AAPL

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Windows survivor - after a long, epic and painful struggle. Very long AAPL

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post #17 of 27
Quote:
Originally Posted by greendisease View Post

 

I used to look forward waking up and seeing what AAPL would do. Now, I'm afraid constantly. I just pray Apple has enough smart people to turn this thing around! I have faith that they do.

It's not Apple, it's the anal-ists that are completely clueless without their insider information.

They panic when they lose their regular snitch in the product chain to tell them what's going on.

post #18 of 27
Quote:
Originally Posted by christopher126 View Post

I'm going to diversify, too. I will never buy a Samsung product!

 

I know, I know, there are "currently" Samsung parts in my iPhone and iPad...but, I will never buy a Samsung TV, DVD player, camera or appliance.

 

Well, if the North Korean leader goes completely off his nut, your personal embargo will be taken care of for you.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #19 of 27
Quote:
Originally Posted by quinney View Post

I wonder if Pegatron and Foxconn use all the same component suppliers. If not, some analyst doing checks of a subset of the supply chain could misinterpret this change in weighting between the two manufacturers as a decrease (or an increase) in total production of iPhones.

 

My understanding is that Apple buys the components and ships them to Pegatron and Foxconn. People who have tried to figure out what Apple's up to by tracing components haven't been successful. That's why Cook made the comment that he did. 

Quote:
Originally Posted by Captain J View Post

97% of rumors WERE false under SJ. The percentage of correct ones under Cook, especially the ones that keep cropping up over and over are much higher. Look at the iphone 5 and ipad mini rumors/leaks.

 

I've heard that Cook is going to double down on secrecy, but then that's just a rumor.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #20 of 27
Originally Posted by Macky the Macky View Post

I've heard that Cook is going to double down on secrecy, but then that's just a rumor.

 

post #21 of 27

What exactly do you think the most profitable company on earth must turn around?

post #22 of 27

I was pretty much set against a lower cost phone, until I read this piece:

 

http://www.asymco.com/2013/03/11/where-are-the-android-users/

 

When it comes to Apple, this bloke is pretty much the only analyst/blogger/journalist worth listening to.

post #23 of 27
Any
Quote:
Originally Posted by Macky the Macky View Post

Well, if the North Korean leader goes completely off his nut, your personal embargo will be taken care of for you.


Any coincidence that Google's Schmitt makes a visit to North Korea just weeks before they withdraw the ceasefire with South Korea?
post #24 of 27

This is a continuous process and it is a fact. Tracking Apple's logistics will become impossible mission. So it should be. 

post #25 of 27
Quote:
Originally Posted by greendisease View Post

 

I used to look forward waking up and seeing what AAPL would do. Now, I'm afraid constantly. I just pray Apple has enough smart people to turn this thing around! I have faith that they do.

Turn what around?  The stock price?

post #26 of 27
Quote:
Originally Posted by Macky the Macky View Post

I've heard that Cook is going to double down on secrecy, but then that's just a rumor.

Well to be fair we've gone almost 4 months and we haven't really had any credible leaks of anything so far.  No leaked photos of anything.

post #27 of 27
What is FDD and what is TDD? Jargon without explanations is pretty bad writing.
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