After Apple reported earnings today, it's not just investors who are poring over the results to see how the world's most valuable company fared.
Hundreds of suppliers around the world pay close attention for clues about whether their fortunes are poised to rise or fall. Which companies are most closely correlated with Apple? It’s not necessarily the highest-profile or best-known suppliers.
For example, Hon Hai Precision Industry, the Taiwanese company that makes iPhones and iPads at its factories in China and gets about half its revenue from Apple, doesn't track its customer's shares that closely in the stock market.
It is lesser known companies, including Alps Electric and TDK, whose shares have been most closely correlated among Asia suppliers over the last three months, according to data compiled by Bloomberg.
Alps Electric makes decidedly unglamorous products such as actuators and switches for smartphones. TDK supplies batteries and inductor coils. It gets about 7 per cent of its revenue from Apple and Alps receives about 5 per cent, according to Bloomberg’s supply chain analysis.
Apple shares have slid 13 per cent since the last earnings report in October on concerns that iPhone sales have dropped off. Alps Electric fell 1.4 per cent as of the close in Tokyo trading on Wednesday, compared with a 2.8 per cent gain in the benchmark Topix index.
Alps cut its annual profit forecast 19 per cent because smartphone component demand is not as strong as expected, it said in a statement after the market closed.
"To some extent, you've had this anticipation that Apple's numbers aren't going to look that great and this is why the likes of Alps is trading at nine times forward earnings," said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners in Singapore. "Those earnings are more likely to be revised down."
Apple forecast a sales decline for the first time in more than a decade, adding to evidence that the market for smartphones is becoming saturated and that expansion in China is no longer enough to maintain the company’s unprecedented run of growth.
Revenue in the first three months of the year will be $50 billion to $53 billion, Apple said, the first quarterly drop since 2003 and below analysts’ estimates for $55.5 billion.
Researcher IDC predicted in December that 2016 smartphone growth would dip below 10 per cent for the first time ever . By 2019, shipments are projected to decelerate further, with sales seen rising just 4.7 per cent in 2019.
iPhone sales will also slow, according to IDC. “The entire smartphone market is very weak and very mature, and the replacement cycles have been extended,” said Anvarzadeh. “It’s not looking too good for these component suppliers.”
Apple's US suppliers tend to be the most correlated, in part because they trade in the same market and in the same currency. Broadcom and SanDisk, for example, have correlations of 0.52 and 0.47 over the past three months.
Among more than two dozen Asia suppliers examined by Bloomberg News, Alps Electric has the highest correlation at 0.31, followed by TDK and LG Display both at 0.28.
Bloomberg
