Implications of Apple results on Asia Tech :: Macquarie Research,

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Implications of Apple results on Asia
Tech
Event
 Apple (AAPL US, NR) reported strong CY1Q11 results on 20th April, driven by
strength in smartphones. While the iPad missed due to model transition, the
company guided to a sharp acceleration in 2Q, in-line with our Asia tech view.
AAPL has not and does not expect any major supply chain issues post the
Japan-quake, even factoring in current power rotation and disruption issues.
Major APPL beneficiaries in Asia are TPK/Wintek (touch panel),
Samsung/Toshiba (NAND Flash), Radiant/Coretronic (Backlight), Largan
(camera module), Murata (passives),TXC (crystal), LGD (LCD panel),
Catcher/FTC (casing), Hon Hai (assembly), and AAC Acoustic (speakers).

Impact
 Apple results beat. Apple posted record 1Q11, with sales up +83% YoY (-
8% QoQ) and net profit of US$6.0 billion. The key strength was driven by beat
in iPhone units (18.65m, +113% YoY) while iPad (4.7m unit) was below
expectation of ~6.3m mainly due to transition from iPad 1 to iPad 2. However,
mgmt noted demand is extremely strong, and it had "sold out every iPad 2 we
had in 1Q." APPL made no mention of new product launch schedules (iPad3
or iPhone5). Our checks indicate that iPhone shipments in 2Q could be flattish
while iPad2 shipments could double to ~9m.
 Strong iPad/iPhone positive for supply chain. Overall, strong iPhone/iPad
is positive for touch panel (TPK/Wintek), Hon Hai (assembly), Murata
(passives), TXC (crystal), and NAND flash (where near-term supply issues
are likely to be reflected in solid spot prices and benefit Samsung over
Toshiba). AAPL was confident about 2Q demand for iPad2, consistent with
our checks of strong ramp in the supply chain. This is positive for TPK/Wintek
(glass-type touch), Sintek/Cando (iPad sensor), Radiant/Coretronic (BLU),
FTC (metal casing), LGD (panel) and Hon Hai (assembly). iPhone strength is
from US (+155% YoY) and China (+250% YoY), Largan/Genius are the major
camera module suppliers, AAC Acoustics (speakers) is another beneficiary.
 Supply chain impact under control. Apple stated it did not see any material
component supply or cost impact in 1Q11 and does not expect any in 2Q11
from the quake. Apple sources a variety of components from JPN including
NAND flash, LCD panels, optical drives, resin, coil etc. While APPL stated
beyond June there could be unknown risk, based on everything they can see
now (i.e. power rationing/shortage and supply chain disruption), the supply
chain is not expected to get any worse and remains under control. This is
consistent with our Japan Tech Team's assessment that the supply chain is
gradually normalizing (BT Resin is less of an issue with MGC reaching prequake
level by early May, switches/connector back to 80% production, etc).
We note APPL is a tier 1 customer and should get priority, but smaller/tier 2
players might face more difficulty in securing full supply allocation in 2Q.
 Samsung lawsuit. AAPL provided limited colour on the recent lawsuit against
Samsung, noting while it remains a valued supplier, Samsung mobile devices
have "crossed the line" with design and copyright infringement in iPhones and
tablets. Short-term, we see limited impact to Samsung supply chain orders,
but in the medium-term, this could shift Apple's procurement more towards
Japanese or Taiwan firms in NAND flash and LCD panels, in our view.