[Asia Economy Reporter Myunghwan Lee] As concerns over weak demand for Apple's iPhone 14 series continue to arise, domestic component stocks have been on a steady decline.
According to the Korea Exchange on the 2nd, on the most recent trading day, the 30th of last month, BH closed at 25,700 KRW, down 4.46% (1,200 KRW) from the previous trading day. LG Innotek also closed at 273,500 KRW, down 0.55% (1,500 KRW) compared to the previous day.
The sharp drop in Apple shares on the US stock market on the previous trading day appears to have affected these suppliers. LG Innotek is classified as a related stock as it supplies camera modules for Apple's iPhone 14 series. BH also supplies flexible printed circuit boards (FPCB) to Apple.
On the 29th (local time) in the US stock market, Apple plunged 4.91% from the previous trading day as concerns over weak demand resurfaced. The decline was driven by a Wall Street report downgrading Apple's investment rating. On the 28th, foreign media reports that Apple had canceled plans to increase iPhone 14 production caused LG Innotek (-10.50%) and BH (-6.70%) to fall sharply.
However, domestic securities firms unanimously stated that these concerns are excessive, citing the fact that the iPhone 14 series was released only recently. KB Securities researcher Changmin Lee diagnosed, "The supply situation for the high-end models (Pro series) is tight, and the distribution inventory level is understood to be significantly below normal levels, so sales volume may appear low compared to actual demand."
It is also necessary to consider that demand is expected to be strong for the high-end Pro series among the iPhone 14 lineup. 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 application processor (AP) as the previous generation and maintain the device design with little change, leading the industry to predict that demand will concentrate on the Pro series.
Experts also reflected this point, forecasting that the sales proportion of the Pro series will increase to the 60% range this year. Guo Mingchi, a well-known Apple analyst at Taiwan's TF International Securities, said, "Shipments of the iPhone 14 Pro series will increase by about 10%," adding, "This is positive for the average selling price (ASP) and product mix of iPhones in the fourth quarter."
If the proportion of the Pro series increases, securities firms analyze that it will be advantageous for both LG Innotek and BH. This is because domestic manufacturers have a high market share of components for the Pro series. KB Securities estimates the domestic companies' supply shares for Pro series components as Samsung Display (OLED, 85%), LG Innotek (camera, 75%), and BH (FPCB, 65%).
Securities firms mostly issued "buy" recommendations for iPhone component stocks as well. DS Investment & Securities researcher Taewoo Kwon analyzed, "In conclusion, the excessive decline in related stocks is a buying opportunity," adding, "LG Innotek and BH, which have clear growth potential, can outperform the market in IT volatility conditions." Meritz Securities researcher Seungsu Yang also advised buying BH, stating, "Considering valuation and iPhone shipment trends centered on Pro models, it is judged to be an oversold zone and should be taken as a buying opportunity."
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