Today, well-known Apple analyst Ming-Chi Kuo updated a report saying that the market overestimated the 5G mmWave iPhone shipments.
The report believes that due to the impact of COVID-19, the global 5G millimeter-wave base station installation is lower than expected. Therefore, we estimate that the millimeter-wave iPhone shipments in 2020 and 2021 will be about 4-6 million and 25-35 million units, respectively. It is lower than the market expectation of 10-20 million and 40-50 million units, so Speedtech’s contribution from the millimeter-wave iPhone’s high single-piece components will be lower than expected.
The report believes that Luxshare Precision’s profitability is expected to increase significantly through the vertical integration cooperation with Speedtech, but this means that the profit contribution of vertical integration to Speedtech will be significantly lower than market expectations.
However, new business growth requires a huge investment from Luxshare Precision. Therefore, in the vertical integration of Luxshare Precision and Speedtech (such as AirPods Pro, iPhone, Apple USB-C cables, etc.), Luxshare Precision will obtain most of the profits. And when facing Apple’s bargaining, the pressure on Speedtech is higher than that of Luxshare Precision.
Speedtech’s revenue scale will grow with Luxshare Precision, but its gross margin/profit/EPS growth will be lower than market expectations. It is estimated that Speedtech’s EPS will only grow by 15-20% YoY and 10-15% YoY in 2021 and 2022, which is significantly lower than market expectations of 50-60% YoY and 40-50% YoY.
Luxshare Precision’s AirPods Pro and Apple USB-C cables have limited market share growth. GoerTek and FIT’s AirPods Pro market share is expected to grow in 2021. In terms of Apple USB-C cables, the market share of Luxshare Precision, Speedtech, FIT, and JAE in 2021 will be similar to 2020.
Apple and Huawei are Speedtech’s main customers. Due to the impact of the US ban, Huawei’s mobile phone competitiveness has declined. Speedtech’s EPS growth may be lower than market expectations.