Apple has a plan B as iPhone demand peaks; Suppliers don’t
In a world where iPhone demand is on the wane, Apple Inch asa Plan B. As customers wait longer between upgrades and the smartphone market saturates, Apple can fall back on charging higher prices for each handset and ra king in more money from services such as streaming music, digital videos and data storage.
But there’s no back-up for many of the companies that supply components for the iPhone. The latest evidence that what’s bad for Apple can be terrible for suppliers came on two continents within hours of each other. Japan Display, which gets more than half its revenue from the iPhone maker, cut forecasts. Then Lumentum Holdings, a top maker of iPhone facial-recognition sensors, lowered its secondquarter outlook. On Tuesday, Hon Hai Precision Industry, the biggest assembler, missed estimates.
“Suppliers are more dependent on volume than Apple,” said Woo Jin Ho, an analyst at Bloomberg Intelligence .“This raise san incremental risk for there st of the supply chain .” Apple didn’ t respond to a request for comment.
Faced with a maturing smartphone market, Apple’ s strategy has been to entice customers to pay more for phones with new features such as facial recognition and more vibrant screens.
The 3-D sensing components from companies like Lumentum are found in iPhones that often cost more than $1,000. Fewer people can afford to pay that much for a new device. But when a sale does happen, suppliers get a onetime payment for their component, while Apple can generate hundreds of extra dollars per gadget. In itsmost-recent quarter, Apple reported almost no increase in the number of iPhones sold, but revenue from that business jumped 29 percent from a year earlier.