The use of more sapphire in new Apple Inc iPhone models is likely to benefit Taiwanese suppliers of the material, even though sales of the new iPhones may fall short of market expectations, Yuanta Securities Corp (元大證券) said.
If Apple’s use of sapphire substrate in its fingerprint sensor for the iPhone 5S is also extended to new iPad models, leading other device makers to follow suit, it could triple demand for the material, the brokerage said in a note to clients yesterday.
On Tuesday, Apple unveiled the iPhone 5S and iPhone 5C in Cupertino, California, and Beijing, with the iPhone 5S featuring a sapphire crystal-covered home button that has a inbuilt fingerprint sensor. The fingerprint-based authentication process is the company’s latest effort to protect users’ privacy in the event of their iPhone being lost or stolen.
Apple’s use of sapphire substrate in the rear camera cover to protect the camera lens in its previous iPhone models led to a similar feature on products from Samsung Electronics Co, HTC Corp (宏達電) and some Chinese smartphone makers.
In Taiwan, companies such as Crystalwise Technology Inc (兆遠電子), Crystal Applied Technology Inc (晶美應用材料), Acme Electronics Corp (越峰電子) and Tera Xtal Technology Corp (鑫晶鑽科技) are involved in sapphire substrate-related businesses.
“This new adoption on the iPhone 5S will lead to an additional 10 percent of sapphire substrate industry supply in 2014,” Yuanta analyst Andrew Chen (陳治宇) said in the note. “The most bullish market estimate is that sapphire substrate demand could increase by another 30 percent if fingerprint sensors become a mainstream function on smartphones and tablets.”
While the addition of fingerprint authentication on the iPhone 5S has raised market expectations about higher sales at Taiwanese sapphire substrate suppliers, Chen said investors should not be too overly optimistic about fingerprint sensor demand.
Instead, he said sapphire companies’ earnings outlooks would be dependent on an improvement in average selling prices (ASP) in the industry, which have grown by between 10 percent and 15 percent this year.
“If industry supply and demand improves to a level where ASP can meaningfully increase, their [the firms’] long-term earnings could see a significant upside,” he said.
Separately, as fingerprint sensors and motion sensors also require additional semiconductor content in the new iPhones, JPMorgan Securities analysts led by Gokul Hariharan said it could benefit Taiwan Semiconductor Manufacturing Co (台積電), the world’s largest contract chipmaker, and Advanced Semiconductor Engineering Inc (日月光半導體), the world’s biggest chip packager and tester.
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