[Asia Economy Reporter Lee Myunghwan] Stocks related to iPhone components continue to struggle to break away from the downward trend.
According to the Korea Exchange on the 29th, LG Innotek closed at 275,000 KRW, down 0.72% (2,000 KRW) from the previous trading day. BH also closed at 26,900 KRW, down 0.92% (250 KRW) from the previous day. LG Innotek supplies camera modules for the iPhone 14 series. BH also supplies flexible printed circuit boards (FPCB) to Apple, thus being categorized as component-related stocks.
The decline in these stocks has somewhat eased compared to the previous day. On the 28th, following foreign media reports that Apple had canceled its plan to increase production of the iPhone 14, LG Innotek (-10.50%) and BH (-6.70%) both fell sharply. The news of the production increase cancellation raised concerns about weak iPhone demand and fears of an economic recession, which contributed to the sharp drop in the domestic stock market.
Since the launch of the iPhone 14 series, concerns about demand have been continuously raised, leading to a five-day consecutive decline in these stocks. LG Innotek’s stock price dropped 22.54% over five trading days, while BH fell 15.94% during the same period.
However, securities firms collectively say these concerns are excessive. The iPhone 14 series was launched globally only recently, and due to insufficient device quantities, inventory levels remain low. KB Securities researcher Lee Changmin stated, "The sales data from the first three days after launch is too small a sample to discuss overall success," adding, "The supply situation for the high-end models (Pro series) is tight, and the distribution inventory level is understood to be significantly below normal, which may make sales appear weak compared to actual demand."
It is also important to consider the expected high demand for the Pro series, the high-end lineup of the iPhone 14 series. The iPhone 14 series is divided into standard models (iPhone 14 and iPhone 14 Plus) and Pro models (iPhone 14 Pro and iPhone 14 Pro Max). The standard models use the same Apple application processor (AP) as the iPhone 13 and retain the notch design, showing little difference from the previous generation, leading to predictions that demand will concentrate on the Pro series.
Experts also reflect this point, forecasting that the sales proportion of the Pro series will increase to the 60% range this year. Guo Mingqi, a well-known Apple analyst at Taiwan’s TF International Securities, said, "Shipments of the iPhone 14 Pro series are expected to increase by about 10%," noting that this is "positive for the average selling price (ASP) and product mix of iPhones in the fourth quarter." Yang Seungsu, a researcher at Meritz Securities, also commented, "Apple has maintained its production target of 90 million units, the same level as last year," and added, "While demand for the standard models is weak, Apple seems confident about demand for the Pro models."
If the Pro series performs well, it is assessed to be advantageous for both domestic component stocks LG Innotek and BH. This is because domestic companies virtually monopolize the supply of parts for the Pro series. According to KB Securities, the domestic companies’ supply share for Pro series components is expected to be Samsung Display (OLED, 85%), LG Innotek (camera, 75%), and BH (FPCB, 65%).
The investment opinions from securities firms on iPhone component stocks are overwhelmingly "buy." Kim Jisan, head of Kiwoom Securities Research Center, said about LG Innotek, "The strong sales of the iPhone 14 Pro series are absolutely favorable," and predicted, "Considering product mix improvements and favorable exchange rates, fourth-quarter earnings will significantly exceed market consensus." Researcher Yang also advised on BH, saying, "Considering valuation and iPhone shipment trends focused on Pro models, it is judged to be an oversold zone," recommending, "It should be taken as a buying opportunity."
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