New 5G iPhones might be a boon to Taiwan assemblers but challenges ahead

19, Oct. 2020

iPhone 12 Pro and iPhone 12 Pro Max give pro users everything they want out of their iPhone. (Photo courtesy of Apple Inc.)
iPhone 12 Pro and iPhone 12 Pro Max give pro users everything they want out of their iPhone. (Photo courtesy of Apple Inc.)

TAIPEI, NNA - Top assemblers of Apple’s iPhones such as Foxconn Technology Group and Pegatron Corp. are likely to reap higher revenues in the last quarter of the year following the launch of Apple's first-ever 5G phones this week - finally, after a delay of one month.

The unveiling of two sets of phones - the mid-priced iPhone 12 and iPhone 12 mini, and the bespoke iPhone 12 Pro and iPhone 12 Pro Max - has been long-awaited.

But hardcore iPhone fans are willing to wait, especially after the coronavirus pandemic has caused widespread disruptions to businesses, supply chains and regular incomes.

In Taiwan, iPhone interest seems to remain high when pre-sales were launched by telcos. Major operator Chunghwa Telecom Co. reported that all its pre-orders were sold out within an hour of its launch, while PChome, the only authorized online seller for the iPhone 12 and 12 Pro, said the two models were snapped up within a minute after pre-sales were launched last Friday, according to a Central News Agency report.

The 5G capability, fastest chips ever in iPhones, new OLED screen for better display and improved camera functions, as well as the lower prices of the mid-range iPhone 12 and iPhone 12 mini for the mass market are expected to entice buyers, not to mention the sales promotions by competing telcos.

“We expect global shipment of iPhone 12 series will reach 74 million units by the end of 2020, and even higher due to Apple’s good pricing strategy,” Kylie Huang, an analyst at Daiwa-Cathay Capital Markets Co. told NNA

In fact, Foxconn, formally known as Hon Hai Precision Industry Co., has been gearing up for orders at its Chinese factories in recent months.

Factory workers told South China Morning Post that they had been working 10-hour shifts since August to rush out the new iPhones.

“Thanks to the ramp up on orders, Hon Hai is likely to see obvious gains in its smartphone sector for the fourth quarter,” Chiu Shih-fang, an industry analyst at Taiwan Institute of Economic Research, told NNA.

Shipment for the components of iPhone 12 series is expected to range higher from 80 million to 85 million units in the October-December period this year, compared to 75 million units for iPhone 11 series a year earlier, TF International Securities analyst Kuo Ming-chi said in a note released last Monday.

However, Apple’s strategy to focus more on mid-priced smartphones, which have been well received by consumers, is likely to squeeze assemblers’ profits in the long run, Chiu told NNA.

Also, Foxconn is now facing competition from Chinese rivals who are competing for contractor orders for Apple’s mid-priced lineup, said Chiu.

Lower prices and declining sales will mean less profits for assemblers, she added.

Foxconn, the biggest iPhone assembler, declined to comment on its production size for the latest iPhone line-up and anticipated revenues.

The next largest assembler Pegatron, which also has most of its production based in China, could only tell NNA that the situation had improved after the first quarter when the country was placed under very severe lockdowns to contain the coronavirus outbreak.

Chiu said a more obvious rebound in the end market is expected to occur around the second half of 2021, but is subject to the COVID-19 situation in the world.

The smartphone industry had been hit hard by pandemic lockdowns which crippled industrial activities and supply chains. In the second quarter, global production fell by 16.7 percent year-on-year to a total of 286 million units, according to market intelligence provider TrendForce.

However, TrendForce has also noted that global 5G development will see an upswing as competition in the mobile base station market intensifies.

The number of 5G base stations in China is projected to exceed 600,000 in 2020, while Japanese and Korean equipment manufacturers will aggressively expand in overseas markets.

According to a forecast by GSM Association, more than a quarter of cellular devices in China will operate on 5G networks, accounting for one-third of all global 5G connections by 2025.

In August, market data provider Statista reported that Huawei had overtaken Samsung as the smartphone market leader by share of units shipped during the second quarter of 2020, accounting for 20 percent of the market. It marked the first time that Huawei claimed the top spot, with Apple iPhone in third place.

Way ahead of the new iPhones, Huawei and other players had already rolled out many models of 5G phones last year.

Statista said nearly 38 million iPhones were shipped during the second quarter of 2020. It also noted a tendency of increased Apple smartphone shipments in the fourth quarter every year since 2011.

The figures peaked in the fourth quarter of 2016 when over 78 million iPhones were shipped worldwide.

For Apple, the arrival of 5G marks the beginning of a new era for the iPhone, said Greg Joswiak, Apple’s senior vice president of Worldwide Marketing.

“We’re once again pushing the boundaries to deliver incredible computational photography advancements, Super Retina XDR displays, and the biggest leap in durability in iPhone history with the new Ceramic Shield front cover," he said, referring to iPhone 12 and its mini version.

Prices for iPhone 12 range from $799 to $979, while the mini costs between $699 and $879, depending on where you buy them.

The iPhone 12 Pro and iPhone 12 Pro Max, which are priced from $829 to $1,399, are designed for those who want the best features iPhone has offered so far with more advanced technologies and superior photography.

“This is a huge leap for iPhone, bringing the best 5G experience in the market and delivering our most advanced technologies to users who want the absolute most from their iPhone,” said Joswiak.