For Apple's Suppliers, Excitement from iPhone Launch Dulled by China’s Tough Stance

Following Apple’s launch event, we make no change to our forecasts and fair value estimates for Apple's suppliers like TSMC (TWD 850), Sunny Optical (HKD 107), Luxshare Precision (CNY 41.50), Largan (TWD 2,500), and AAC Technologies (HKD 17). We think the launch is slightly negative to the supply chain. This is due to possible renewed fears that Apple is increasing pressure on its suppliers to maintain its profitability, at the latter's expense. No-moat Luxshare and AAC should bear the brunt of such pressure, in our view. Sentiment may worsen further as China says it has noticed “security incidents" concerning Apple's iPhones, reinforcing worries that China may extend its iPhone usage ban to groups beyond civil servants.