Photo: Dan Frommer, Business Insider
Analysts from Asian firm CLSA are shooting down yesterday’s Apple downgrade from JMP Securities.However, unlike other analysts, these guys are warning that there are near-term risks to Apple thanks to the Japanese earthquake.
JMP theorized Apple’s growth would be flattish after seeing sales growth at manufacturing partner Hon Hai (parent of Foxconn) slow down.
Chitra Gopal and Steve Fox, the two analysts at CLSA say JPM’s theory is wrong because Apple’s share of Hon Hai sales isn’t that large. Further, currency fluctuations make apples to apples comparisons tough.
As for the Japanese quake concerns, they say Apple has heavy reliance on Japan for chips and operates a lean supply chain which could be a problem.
Here’s the full note:
“Hon Hai’s revenue in 2010 was about NT$3trillion and Apple accounted for about NT$700-730bn or 24% of total. For 2011, we had estimated this should rise to about 30% – reflecting full year contribution from iPad
Looking at Hon Hai’s revenue growth in Jan/Feb: this needs to be seen in the context of two factors:
First Hon Hai pulled in a lot of the production from 1Q11 to 4Q10 to mitigate the impact of labour shortages during CNY, borne out by December sales rising 6% m-m – in contrast to normal patterns when most EMS see Dec sales fall m-m (as holiday build out gets completed).
Second, the NT$ has depreciated by 8% in Jan – so y-y comparisons of monthly sales (reported in NT$) are lowered by currency.
The sales growth of 37% y-y in Jan and 26% y-y in Feb are in line with our estimates and consensus. Where there could be transition issues with iPad 3 (given a thinner design, manufacturing yields are typically poor in initial stage) – this doesn’t look to signal a major slowdown, so surprised at the assertions of slowing Jan/Feb sales…
Rather than Jan/Feb sales, part of concerns could be Apple’s heavy reliance on Japan for components. A4 /A5 CPUs are made by Ibiden, and ACF films for displays are 100% sourced from Japan (Sony Chemical and Hitachi). This will affect practically all manufacturing, not just Apple plays. Apple related stocks are getting hit today – I guess one reason could be Apple historically has operated a lean supply chain (carries much lower inventory vs. other consumer electronics/PC makers) – so concerns are the Apple’s shipments could be worse hit.
We were just in Asia where most of the supply chain is very bullish on AAPL build plans; there have been some cancellations in CDMA iPhone orders, but its only 1-2 mm units; we did not pick up anything negative on iPad2 production, even though there is chatter of some yield issues. The current availability of iPad 2 has stretched to 5 weeks (up from 2); is this due to supply or demand?”
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