Apple Inc’s iPhone installment plan in the could shorten the iPhone replacement cycle and expand its second-hand market, which would benefit its main assembler, Hon Hai Precision Industry Co (鴻海精密), in the long term, as it also runs Apple’s iPhone trade-in scheme in China, analysts said.
The US company on Sept. 9 announced a new iPhone installment program for iPhone users keen to renew their iPhone every year.
The monthly payment plan — the lowest price starting at US$32 per month — allows Apple’s customers to buy a new iPhone every 12 months without having to enter a two-year binding contract with US telecom operators.
“The installment program could speed up the iPhone replacement cycle from about two years to one year, further spurring demand for new iPhones,” CIMB Securities Ltd analyst Felix Pan (潘俊宏) said in a note released on Thursday.
Yuanta Securities Investment Consulting Co (元大投顧) said if Apple later extends the installment program to other regions, there would be a significant boost for iPhone demand.
As Hon Hai is iPhone’s main assembler, it is expected to benefit the most from the potential increase in demand, Yuanta analyst Vincent Chen (陳豊丰) said in a note on Thursday.
Apple’s monthly installment plan could also expand second-hand iPhone market and help Hon Hai’s iPhone trade-in scheme in China, analysts said.
SERVICES
Currently, Hon Hai is the sole iPhone assembler handling the used iPhone trade-in program in China, in charge of logistics, refurbishment, trade-ins, recycling and distribution.
“Hon Hai could have a tighter relationship with Apple through the second-hand iPhone business,” Chen said.
Pan said Hon Hai’s role has shifted from a pure manufacturer to a service provider.
“As the iPhone upgrade program is initially available in the US, we forecast that every 5 percent of the iPhone user base in the US market subscribing to the monthly installment plan will increase Hon Hai’s sales and earnings by 2.4 percent and 1.2 percent, respectively,” Pan said, citing CIMB’s earnings estimate model.
Although iPhone order allocation to Hon Hai might drop from 82 percent for iPhone 6 models to 70 percent for the iPhone 6S, the impact of the order contraction should be smaller than expected.
That is because both the 5.5-inch and rose-gold models are exclusively supplied by Hon Hai, the analyst said.
The CIMB analyst expects Hon Hai to enjoy a strong second half after the launch of the new iPhone, with sales this quarter set to grow 6 percent quarterly to NT$1.02 trillion (US$30.64 billion) and rise 41 percent subsequently to NT$1.45 trillion in the next quarter.
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