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Apple Supply Chain

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Why is this topic important now? Where does our view differ?

Given growing macro uncertainty, poor iPhone 6S sales, and a cautious stance on the next-generation model (iPhone 7), pessimism

about Apple-related stocks is growing among investors. As we show in this report, we believe the fortunes of different Apple

suppliers will vary significantly from one company to the next, and the stock market is not necessarily assessing future changes

correctly. Contrary to consensus, we believe the differences between individual companies are getting bigger. With prices of Applerelated

stocks having declined sharply across the board over the last several months and suppliers about to start building up

component/device inventories, according to annual trends, from July for the next-generation iPhone model, we believe now is the

right time to consider what stocks will make good long-term investments. A bird’s-eye view based on our analysis here reveals that

there are a large number of stocks we believe are worth buying (12 companies from Leaders, strong dependents and transformers).

What the 51 companies in our coverage represent

Apple has 195 official suppliers, as of 2015. Our analysis covers 51 of these companies that are in our global coverage (45

device/component makers and 6 assembly makers). While their number may appear small at first glance, the 45 device/component

makers’ bottom-up sales to Apple total roughly US$61 bn, which is equivalent to around 79% of the Apple device/component market

(c.$77 bn) according to our top-down calculations using Apple BOM costs. We estimate that

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