Fri, Mar 07, 2014 - Page 14 News List

Hon Hai expected to build 90 million iPhones this year: Citigroup report

By Helen Ku  /  Staff reporter

Hon Hai Precision Industry Co (鴻海精密) is expected to assemble 90 million iPhone 6 units this year, a significant increase from 49 million iPhone 5S units last year, Citigroup said in a report on Wednesday.

The company, the world’s largest contract electronics maker, may assemble two iPhone 6 models, with one a 4.7-inch edition and the other a 5.5-inch version, the report said.

Hon Hai’s shares closed up 1.69 percent at NT$84.4 in Taipei trading yesterday, outperforming the benchmark TAIEX, which gained 0.94 percent. Citigroup has a “buy” rating for the stock, with a target price of NT$112.

“A larger screen size iPhone would open up a huge segment that Apple is not addressing today [limited by its small screen size],” Citigroup analyst Wei Chen (陳思維) said in the report.

The US company’s new product strategy is likely to benefit Hon Hai over the next few years, he added.

“Hon Hai should be the key beneficiary, as it would be the main manufacturing source [supplying more than 90 percent of Apple’s iPhones] for the iPhone 6 in 2014,” Chen said.

“We believe the iPhone 6 could be the biggest product cycle that Hon Hai has yet seen,” he added.

Given Apple’s higher pricing discipline, Hon Hai, which has been a major industry partner with Apple in assembling the iPhone 5 and iPhone 5S, is expected to see its operating margin improve to 3.1 percent this year from an estimated 2.9 percent last year, Chen said.

Net profits would grow 11.13 percent to NT$121.97 billion this year from an estimated NT$109.74 billion last year, while earnings per share (EPS) are estimated to grow to NT$9.29 this year from NT$8.41 last year, he added.

Hon Hai’s initial iPhone 6 production ramp-up should be smoother than ever, given that most of the new product’s components had been made and used in the current iPhone 5S model, the report said.

Apple may launch its 4.7-inch iPhone 6 product in September this year, followed by the 5.5-inch model in the first half of next year, according to Citigroup.

Citing a survey conducted by Citigroup in November last year, Chen said almost 60 percent of the respondents wanted smartphones with screens larger than 4.1 inches.

With two larger iPhones, Apple will be able to target consumer demand it missed addressing due to the current models’ screen sizes, he said.

The new iPhone products are expected to sport quad-core ARM-based central processing units, sapphire displays, rear cameras with 8-megapixel optical image stabilizer and a fingerprint sensor that can enable mobile payments, Chen said.

“We are very bullish on the iPhone 6 demand outlook, given its larger screen size and major feature [changes],” he said.

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