“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.