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Acoustics supplier AAC posts record 2016 earnings amid rapid tech upgrade cycle

Shenzhen-based firm reports 30 per cent rise in 2016 net profit to 4b yuan

PUBLISHED : Wednesday, 22 March, 2017, 4:23pm
UPDATED : Wednesday, 22 March, 2017, 11:34pm

AAC Technologies Holdings, the world’s top supplier of miniature audio components used by Apple and major Chinese electronics brands, posted record-high net profit and revenue for last year amid a wave of faster technology upgrades in the competitive global smartphone market.

Shenzhen-based AAC, which is believed to be a major supplier for Apple’s upcoming iPhone 8 line, expects to further ride that wave this year as high-tier customers push major feature upgrades.

The company reported on Wednesday a 30 per cent rise in net profit last year to 4 billion yuan (US$579.9 million), up from 3.1 billion yuan in 2015, on the back of strong growth in its non-acoustic business that includes antennas, optical components and so-called haptics vibrators.

Haptics refers to the technology used on smartphones, smartwatches and tablets that enable a user to feel a tactile sensation, or vibration, when interacting with an application.

Total revenue increased 32 per cent to 15.5 billion yuan from 11.7 billion yuan a year earlier, marking the company’s seventh consecutive year of annual sales growth.

The figures exceeded projections of a 3.9 billion yuan net profit and revenue of 15 billion yuan, according to consensus market estimates from analysts polled by Bloomberg.

“These results come amid a more saturated smartphone market,” AAC chairman Koh Boon Hwee said on Wednesday.

The company’s share price advanced 0.6 per cent to finish at HK$86.50 in trading on Wednesday, its highest close since reaching HK$86.90 on February 23.

Koh pointed out that more mid- to low-tier smartphone brands have moved closer to delivering comparable, but more affordable, technical specifications to those from the major global brands.

“Replacement cycles have become shorter, driven by faster technology upgrades,” he said.

There were 1.4 million smartphones shipped worldwide last year, led by Samsung Electronics, Apple, Huawei Technologies, Oppo and Vivo, according to technology research firm IDC.

AAC’s acoustic products include receivers, speakers and microphones, which are used on the iPhone, iPad and Apple Watch. It also has non-acoustic components, such as antennas and the vibration components, used in those same three high-margin products.

Other customers include Samsung Electronics, Huawei Technologies, Oppo, Lenovo, Xiaomi, ZTE, Gionee, Coolpad, LeEco and Meizu.

Koh said AAC is “capable of shipping total solutions” – combining its audio and optical components, radio frequency mechanics and haptic feedback – to enhance use of new virtual and augmented reality applications on devices.

Concerns, however, have been raised on lower-gross margins for AAC’s haptics and metal casings as the company penetrates “less profitable customers”, according to Huatai Reseach analyst Ken Hui.

“We continue to see a mix of positives, such as iPhone acoustics upgrade and volume improvement, and concerns like margin impact from new products at AAC,” Hui said.