Apple’s Taiwanese component suppliers track iPhone maker’s fluctuating stock market fortunes
- Island home to about 15 per cent of 195 globally listed companies that supply iPhone maker
- Biggest suppliers as well as Taiwan index decline after Apple reports worse-than-expected sales
The fortunes of Apple’s Taiwan-based suppliers are so closely linked to the iPhone maker’s stock that they seem to mirror its movement.
About 15 per cent of the 195 globally listed companies that supply Apple are based in Taiwan, according to Bloomberg, including five of the California-based company’s biggest suppliers. Although, most of its suppliers are based in the United States, Taiwan is home to the most important, ranked by how much money Apple spends on their goods.
Apple-related stocks hammered in China, Hong Kong markets after US smartphone giant cuts revenue outlook
Hon Hai Precision Industry, the world’s biggest maker of electronic components, accounts for more than 50 per cent of Apple’s cost of goods.
Shares in Hon Hai Precision Industry, Taiwan Semiconductor Manufacturing Company (TSMC), Catcher Technology, and Zhen Ding Technology Holding, have shown a significant correlation with Apple stocks over the past year.
On Monday morning, these stocks rebounded after heavy losses in the first three trading sessions of 2019.
Hon Hai Precision Industry advanced 2.1 per cent to NT$69.00, poised to break a three-day losing streak. Still, the stock is 2.5 per cent lower than its year-end level of NT$70.80 on December 28.
TSMC rose 2.6 per cent to NT$213.50, also likely to log its first gain in the past four sessions. It has fallen more than 5 per cent so far this year.
Catcher Technology and Zhen Ding Technology gained 4.8 per cent and 2.9 per cent, respectively, to trade at NT$209.50 and NT$75.80. Still, despite the gains, the two stocks have lost 8 per cent and 4 per cent this year.
On Friday, Apple bounced back 4.3 per cent to US$148.26, recouping some losses after a 10 per cent plunge the previous day. The plunge was triggered by Apple’s announcement of worse-than-expected sales during the holidays, which it blamed on an economic slowdown in China.
Taiwan’s benchmark index – Taiex – also closely follows Apple’s stock movement, according to Bloomberg.
The index rose 2 per cent on Monday morning to trade at 9,572.50, following a 1.1 per cent drop on Friday.
Gordon Tsui Luen-on, managing director of investment holding company Hantec Pacific, however, said he did not think a slump in Apple shares would harm the Taiwanese market.
“Apple is just one of the companies bringing business to the manufacturing industry,” he said. “This is only a small part of the whole stock market, and only one company will not be able to have a big impact on the stock market.”
Mainland China, meanwhile, accounts for 10 per cent of Apple’s suppliers. But only one of the top 10 is listed on the mainland, Foxconn Industrial Internet, which accounts for just over 10 per cent of the iPhone maker’s cost of goods.
According to a report on Friday by Beijing headquartered investment company China International Capital Corporation, Apple’s lowered revenue guidance could affect fourth-quarter earnings of companies such as Foxconn.
According to the report, analysts remained cautious about the whole Chinese smartphone industry, and said investors should beware of a possible “big downward revision” in its 2018 earnings. It also said the shrinking of China’s smartphone market will affect companies such as Xiaomi, Huawei, OPPO and Vivo.
“The mobile phone market is entering a sluggish sales phase,” said Louis Wong Wai-kit, director at fund management company Phillip Capital Management. “Look at China. For the first eleven months last year, the sales of handsets in China posted a double-digit percentage drop. Apple’s strategy of launching higher priced phones to push up the average selling price is less popular, and this affected the sales of iPhones.”
A decline in Apple shares could also benefit Chinese smartphone makers. Xiaomi, for instance, rose by 1.7 per cent after a Macquarie Bank report said it expected the Chinese electronics company to see an increased market share in China.
Declines in Apple shares have also affected companies that are yet to list. In November, its biggest supplier of touch-sensitive smartphone screens, Biel Crystal, postponed a US$1.5 billion Hong Kong initial public offering. The company, whose components appear in more than 50 per cent of iPhones and Apple Watches, delayed its IPO after Apple shares slumped a week before amid downbeat market conditions.