"The iPhone 14 Cycle Has Arrived"... Time to Reconsider Component Stocks

LG Innotek and BH Stock Prices
Rise 2% and 8% Respectively Over 5 Trading Days

iPhone 14 Demand Outlook Brighter Than Previous Model

[Asia Economy Reporter Minji Lee] As the unveiling of the iPhone 14 approaches this September, there are forecasts that the component stocks are entering an upward cycle. Although there are analyses suggesting that IT product consumption may decline due to concerns over economic slowdown, the popularity of the iPhone 14 is expected to remain strong.

According to the Korea Exchange on the 26th, LG Innotek, which supplies camera modules for the iPhone, saw its stock price rise 2% over the past five trading days, trading at 344,000 KRW. During the same period, BH, which supplies flexible printed circuit boards (FPCB), surged 8.28%. Investor sentiment has expanded as earnings forecasts have improved ahead of the iPhone 14 launch.

These two stocks typically experience increased volatility each year around the time of the new iPhone release. The solid demand driven by improvements in the new iPhone’s specifications translates into better performance for component stocks. Considering the iPhone 14’s different front design and significant camera performance upgrades compared to its predecessor, demand is expected to surpass that of the previous model.

According to industry sources, the initial shipment volume of the iPhone 14 is estimated at 93 million units, 15% higher than the 82 million units of the iPhone 13. The replacement cycle for existing major models is also arriving, further strengthening demand forecasts. Hyunjin Oh, a researcher at Kiwoom Securities, said, “Despite ongoing concerns about economic recession and global companies cutting expenditures, the iPhone is solidifying its position within the premium model segment,” adding, “Assembly companies have also begun expanding their production workforce to meet the high demand.”

The recovery of the Chinese market is also positive. The Chinese smartphone market is expected to boom in the second half of the year following the lifting of COVID-19 lockdowns. The manufacturing Purchasing Managers’ Index (PMI) has been on a rebound since May, with smartphones showing the fastest recovery among major IT hardware sets. Since the iPhone surpassed a 20% market share in China for the first time in the fourth quarter of last year, expectations for demand have heightened. Local distributors are reportedly paying record-high advance payments to secure sufficient quantities of the iPhone 14.

LG Innotek’s annual operating profit estimate stands at 1.5579 trillion KRW, about 100 billion KRW higher than the 1.4785 trillion KRW estimated three months ago, reflecting the positive outlook for the iPhone 14’s success. Dongju Lee, a researcher at SK Securities, explained, “LG Innotek holds a 60-70% market share, and there are limited camera module suppliers capable of meeting the iPhone’s volume and quality requirements,” adding, “It will maintain its main supplier status in mobile, XR, and automotive sectors.” BH’s annual operating profit forecast was raised by 20 billion KRW to 168 billion KRW from three months ago (148.1 billion KRW). Go Eui-young, a researcher at Hi Investment & Securities, said, “Since BH supplies over 80% of the FPCB for the iPhone, sales growth is expected,” and noted, “A favorable exchange rate is also positive.”