Change afoot for Apple suppliers: UBS

By Kevin Chen  /  Staff reporter

Sat, Dec 07, 2013 - Page 13

Apple Inc’s strategy of diversifying its suppliers may lead to mixed fortunes for companies in the integrated circuit (IC) substrate sector that target the US company’s next-generation application processor, UBS Securities said.

An application processor is designed to support applications running on an operating system such as Apple’s iOS and Google’s Android.

UBS Securities’ Taipei-based analyst Samson Hung (洪希民) said on Thursday that Unimicron Technology Corp (欣興電子), a Taoyuan-based printed circuit board maker, might become Apple’s third IC substrate supplier after Ibiden Co and Semco Machine Corp of Japan.

“As the core-layer material in IC substrates for Apple’s new application processor changes from bismaleimide triazine (BT) to ajinomoto build-up films (ABF), Unimicron is able to leverage its experience in ABF-based IC substrates,” Hung wrote in a client note.

Hung said Unimicron would beat its cross-town rival Kinsus Interconnect Technology Corp (景碩科技) in passing Apple’s initial qualification stage and sending sample products to the iPhone and iPad maker for further mass-production evaluation.

If Unimicron becomes the third IC substrate supplier for Apple, it could negatively impact Kinsus, which is generally expected to become the next qualified vendor. Kinsus is a subsidiary of Pegatron Corp (和碩), an assembler of iPhone and iPad products.

“Kinsus may lose its advantage after Apple switches from BT to ABF,” Huang said. “With competition from Unimicron, we see a risk that the average selling price may drop and that Kinsus may lose Apple orders.”

Unimicron’s shares rose 2.28 percent to NT$22.4 yesterday, while those of Kinsus decreased 1.46 percent to NT$101.

Since the beginning of the year, Unimicron’s shares have dropped 27.27 percent, compared with Kinsus’ increase of 10.87 percent.

The two firms released their sales figures for last month yesterday, with Unimicron reporting an annual decline of 18.89 percent to NT$4.66 billion (US$157 million) and Kinsus posting an annual increase of 3.97 percent to NT$1.85 billion.

In the first 11 months of the year, cumulative sales at Unimicron fell 10.94 percent year-on-year to NT$55.42 billion, while Kinsus registered a 5.09 percent rise to NT$21.24 billion.

UBS said it predicted that Unimicron would be allocated between 5 percent and 10 percent of Apple’s orders for the new application processor IC substrate, compared with more than 60 percent of orders for Ibiden and around 30 percent for Semcon.

However, the revenue contribution from the new application processor IC substrate would account for just 3 percent of Unimicron’s revenue and 5 percent of its earnings next year, UBS estimated.