08.09.2016

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Apple iPhone 7: A transition phone for those who can’t wait

Apple presented its new iPhone 7 generation yesterday, whose new or dropped features were in line with earlier leaks. The design of the iPhone 7 and 7 Plus looks much like their predecessors in 2015 and 2014 (still heavier than iPhone 6 and 6 Plusfrom 2014). Incremental improvements include a better camera, stronger processor, stereo speakers, a more sophisticated home button and water-resistance. The iPhone 7 Plus features a second high-end camera with a telephoto lens. Most controversial was the removal of the headphone jack as the company is heading toward a “wireless future”, where devices would connect without cables. We believe that the removal of the headphone jack was related to a thinner next generation 2017 iPhone with an OLED display that does not need LED backlighting (the 3.5mm headphone jack would have been a bottleneck). Apple includes a wired pair of headphones that connect to the iPhone via the lightning interface (there will also be an adaptor in the box for conventional headphones). In addition, Apple offers wireless earbuds, AirPods (price USD 159), which use the new Apple W1 chip for short-range connectivity (backwards compatible with existing Bluetooth headphones). Apple also presented three new wireless headphones of its subsidiary Beats using the W1 chip. We remain unconvinced that Apple will be able to return into growth mode with the iPhone 7 generation, continuing to forecast a flat trend (in terms of sell-through). We expect the next strong replacement cycle starting in September 2017 (shift from two to three year cycle) driven by a more differentiated iPhone (10 year anniversary phone). 

The company also announced a water-resistant second generation Apple Watch including GPS functionality. Apple also announced a new partnership with Nike , including a Nike+ edition of the watch. We don’t expect major impact on volumes.

Impact on our coverage:

    ams  (Hold, TP CHF 32.00, CP as of 7 September CHF 33.00): We estimate that ams generates about 15% of sales with Apple this year, down from a peak of about 25% two years ago following the NFC booster socket loss to NXP in the iPhones, which might impact now also the second generation of the Watch. We expect that ams will continue to supply an ambient light sensor (ALS) and MEMS microphones. While the new AirPods include proximity sensors, they might be an Apple in-house solution. 

    Dialog Semiconductor  (Hold, TP EUR 29.00, CP as of 7 September EUR 32.31): Dialog Semiconductor generates about 80% of sales with Apple (power management ICs). We do not expect major changes in the USD content compared to the previous iPhone and Apple Watch generations. The wireless connectivity chip in the AirPods would have been a socket opportunity for Dialog Semiconductor but Apple appears to have opted for an in-house developed solution (W1 chip). 

    Infineon  (Buy, TP EUR 15.50, CP as of 7 September EUR 14.82): Infineon generates ≤5% of sales with Apple. Main product categories include RF/protection devices as well as MEMS microphones. One impact for Infineon is the number of won microphone sockets (no data available) vs. competitors, which include ams (via Knowles) and STMicroelectronics. We assume that the NFC SE chip will have remained with NXP. 

    Logitech (Hold, TP CHF 21.00, CP as of 7 September CHF 21.15): Following the acquisition of headphone maker Jaybird in April 2016, we regard Apple’s “wireless future” as an opportunity for Logitech. However, using a potentially somewhat “proprietary” Bluetooth protocol the new W1 chip might be a competitive advantage in terms of connectivity reliability and performance for Apple’s accessories including Beats. The iPhone 7 will feature stereo speakers (2x louder than 6s), which might be good enough for some, but we do not believe that it will have a major impact on external mobile speaker sales. 

    OSRAM (Hold, TP EUR 43.00, CP as of 7 September EUR 45.54): Earlier this year Apple’s supplier list indicated socket losses in 2015 for OSRAM, which dropped from the top 200 list. OSRAM’s high power LED chips have previously been used as camera flash in iPhones, potentially being replaced by Lumileds (Philips ). The new iPhone 7 generation features an updated 4-LED flash, but we do not have insights regarding the LED chip supplier.

    STMicroelectronics (Buy, TP EUR 7.30, CP as of 7 September EUR 6.80): We assume that STMicroelectronics (Apple accounting for ≤5% of sales) was able to protect a certain shares of the MEMS microphones sockets. Following the MEMS accelerometer/gyroscope socket losses in the iPhones over the past years against Bosch and InvenSense, ST could regain territory in the first generation of the Apple Watch, which was, however, not repeated in the iPhone 6s generation. There will be additional MEMS accelerometers/gyroscopes in the new Apple products (optical image stabilization now also in S version vs. previously in Plus only; MEMS accelerometers in AirPods) but we have no insights regarding suppliers yet. 

    Süss MicroTec (Buy, TP EUR 9.00, CP as of 7 September EUR 6.22): We believe that the new A10 Fusion processor of the iPhone 7 is featuring TSMC’s proprietary advanced packaging technology InFO, using the equipment of Süss MicroTec (coater/developer, lithography scanners). Related record orders were booked in 2015 and sales are recognized this year (included in guidance). 

    u-blox (Hold, TP CHF 215:00, CP as of 7 September CHF 219.10): While the new Apple Watch features GPS functionality, we would expect that the supplier is Broadcom, whose combo solution BCM 43342 was used in the first edition of the Watch supporting Bluetooth, WiFi, NFC and FM

Companies im Artikel

AMS

Apple

Dialog Semiconductor

Infineon

Nike

Philips

Baader Research Smeil! Christine Reitsamer, Baader Bank

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