“AAC Technologies Holdings Inc, an acoustic components supplier to Apple Inc, said on Wednesday second-quarter net profit fell for the first time in nearly four years, hit by plateauing iPhone sales and a sluggish global smartphone market,” Sijia Jiang reports for Reuters.
“Shares of AAC plunged almost 11 percent after the company said net profit dropped 39 percent from a year earlier to 653 million yuan ($95 million), the first quarterly fall since July-September 2014. The stock later recovered, closing 1.3 percent higher,” Jiang reports. “‘Apple in terms of volumes is hitting a plateau this year, and while it has been successful in driving product prices and profits, volume stagnation affects its suppliers,’ said Neil Shah, partner at Counterpoint Research.”
“AAC, which supplies acoustic and haptic components for Apple products such as the iPhone, iPad and Apple Watch, was estimated by research and brokerage firm Sanford Bernstein to derive half of its revenues from the U.S. tech giant,” Jiang reports. “AAC managing director Richard Mok told a media briefing that the company expects better profit margins in the traditionally stronger second half of the year, citing growth potential for its new optic lens business. The escalating China-U.S. trade war is not hitting the company directly at the moment, Mok said, with none of its products or components on the list of those imposed with higher tariffs.”
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MacDailyNews Take: AAC likely wouldn’t mind an iPhone supercycle soon. Unfortunately, supercycles soon turn into tough compares. The days of rapid smartphone growth are ending – there are only so many buyers on the planet, after all – but innovation will power Apple’s sales and entice switchers to upgrade to the platform and ecosystem that all of the knockoff peddlers dream of having.
If AAC raises prices of the components it provides to Apple, then Apple will pass on the increase cost to the consumers. Apple should look into an alternative supplier for its acoustic components.
The Supercycle is a myth like the Loch Ness Monster, fiscally responsible Republicans or morally upright televangelists.
The cell phone market for high end smart phones is now saturated. The reason for the outrageously overpriced iPhone X is that the only way Apple could move the needle on profits was to drive up the average selling price.
There are only so many people on the planet who can afford and will pay what it costs for a smartphone and the plan to support the device. Those markets are almost all at saturation.
I am not a fan of Android, but for many people it is just fine. They like the buy one get a handful more for free- we are way past BOGOs on Android.
Apple can only go so high on price and beyond that growth will mostly be limited to getting Android users to switch. The iPhone X was a test of demand destruction- seeing how high they can jack the price before the sheeple say “no más”.