Apple’s industrial chain company change: order-takers don’t necessarily get the world.

Apple’s suppliers have been a little annoyed lately. On September 7, Ophthalmos (002456.SZ) closed down 3.99 per cent at 15.66 yuan. On September 1st it was reported that Ophthalmos had been removed from Apple’s supply chain and had lost all of its iPad touch business. On the same day, Ophthalm fell to a halt. Although Ophesons has clarified the rumours, its shares have fallen 17.19 per cent in the week from August 28 to September 7.

Apple's industrial chain company change: order-takers don't necessarily get the world.

September 4, the first mobile phone industry research institute president Sun Yanxuan told the Times Weekly reporter, although the touch business is not Ophthalm’s main output capacity, and Apple’s business accounted for a small proportion, but from this secondary market strong response to see the impact of Apple’s supply chain, a little “wind and grass” may bring huge losses.

“Once the touch business is really ‘abandoned’, how risky is of Ophthalm’s core optical orders in Apple’s supply chain?” Will other domestic factories encounter similar things? Mr Sun said.

On August 19th Apple to become the world’s most valuable publicly traded company, with a market capitalisation of more than $2 trillion. From the 2010 iPhone 4 out of the sky, detonated the market so far, known as the A-share Apple industry chain “golden decade.”

In ten years, the concept of Apple’s industrial chain shares has become the most high-profile investment theme in the field of A-share technology, ingesting a number of bright performance in the industrial chain, the market value of soaring star companies.

Behind it are risks and concerns about high performance concentration and uncertainty.

In early August, Apple’s app market was rumored to be off WeChat after the U.S. government announced a ban.

Apple’s concept stocks then suffered a collective setback. On August 10, Amly (300218.SZ) and others fell, leading Puzzle Manufacturing (002600.SZ), Blues Technology (300433.SZ), Gower (002241.SZ) and others also fell sharply.

Recently, a number of industry insiders told The Times that according to industry practice, the product supply chain will gradually stabilize, unless there is a major change. But will Apple’s industrial chain adjust in the future? That may be something apple CEO Cook is struggling to determine.

Lebogoko’s past.

Its “high-gloss moment” is still remembered in the stock bar of Leppoko (002106.SZ).

Recently, consumer electronics industry investor Li Zheng (analyte) and the Times Weekly reporter talked about Ophet Guang, can not help but think of the former Apple concept “bull stock” Lebao Gaoke ups and downs of the past.

Leibao Gables, then a touch-screen leader, cut into Apple’s industrial chain because of its supply to taiwan-owned Yuhong Group, whose orders once accounted for 52% of its total sales.

Since October 2008, The Price of Leppoco has skyrocketed, rising 13-fold in two years.

But the good times are not long, as the Group began to expand to the upstream touch screen business, Leibao Gaoke lost the opportunity to hold apple “thighs”. Since 2012, there have been several years of increased income and no profit, resulting in a sharp fall in share prices, institutional shareholders scattered and fled.

Recently, due to the supply of Huawei notebook products, Leibao Gaoke has again received attention and sought after, and was dubbed “Huawei concept stock”, listed companies have repeatedly reminded investors to “look cautiously”.

Today, when Wang Xingcun, the secretary of Leibao Gaoke, mentions the mobile phone business, it is still hard to hide his disappointment and coldness.

“We’re not going to be involved in the mobile phone business anymore, we pulled out of the global market in 2011. Products, price homogenization is serious, competition is too fierce. On September 4th, Wang Xingcun told Time Weekly.

Wang Xingcun said that the main reason for exiting the mobile phone business that year was not only because of the high competition and low gross margins, but also because the demand volatility of the mobile phone industry was very large, and profit margins were squeezed.

“It could be 15m this month, down to 5m next month, and the labor costs are too high for manufacturers to make money.” Wang Xingcun said.

Li Zheng believes that the lack of core technology, low barriers to the industry, over-reliance on a single customer, is the common and common disease of many Apple suppliers.

In April of this year, automation equipment manufacturer Bo crowd Seu engineering to break through the customs section of the creation board was No.

So far in 2017, its main customers have been Apple and Apple Upstream and Downstream, according to its prospecto, and the company’s performance has plummeted as Apple’s orders have fallen.

In the first quarter of 2020, its net profit fell from 280 million yuan in 2019 to a loss of 120 million yuan, while revenue from Apple fell from 900 million yuan to 0.2 billion yuan.

Recent applications for the company’s board of Oats Technology, Blue Light and Electric are also highly dependent on Apple orders.

Li Zheng believes that the saturation of the mobile phone market, cyclical fluctuations, in the long run, such a single customer-dependent supplier performance will be seriously affected.

Profit margins are compressed.

Among the leading companies in the supply chain, listed companies such as Gower, Lans Technology, Desai Battery (000049.SZ) and Lixun Precision (002475.SZ) all have high customer concentration.

According to the 2019 annual report, the top customer sales of these companies accounted for more than 40%, the top five customers accounted for about 70% of sales. Many in the market believe that the big probability of its number one customer is Apple.

The company also noted in the announcement that, despite long-term and stable relationships with key customers, order fluctuations and operational risks can occur if significant adverse changes occur in the operations of key customers or are affected by internal and external factors.

Recently, an executive of one of Apple’s main suppliers, in an exchange with Time Weekly, pointed out that about 40% of the sales share of the largest customers “just controlled well”, because of the positive relationship between the two sides and Apple’s growth space.

“To be able to work with some of the world’s top customers for a long time is a boost and promotion for us.” The person said.

Media reported that the United States has imposed tariffs on imports from China several times since 2019. Apple has asked suppliers to assess the cost impact of moving 15 to 30 percent of its capacity out of China and into Southeast Asia.

On September 7th, TrendForce Consulting analyst Xiao Wei zhong told Time Weekly that it is an inevitable trend for apple industry chain to turn to Southeast Asia and South Asia to establish related supply chains, but China accounts for a higher proportion of Apple’s revenue, and Chinese suppliers already have a strong industrial cluster, the infrastructure is more complete than Southeast Asia, South Asia, Apple’s main production capacity is expected to be in the next few years mainly in China.

Even harder to ignore is the fact that Apple, with its bargaining power, keeps profits in its own backyard, the profit margins of suppliers and foundry companies are being squeezed, and the notion of “apples eat meat and substitutes drink soup” has been prevalent.

A Review of the annual reports of the 18 major listed companies in Apple’s supply chain found that net interest rates have been on a downward trend since 2013, with net interest rates generally between 2% and 5% as of 2019.

On September 7th Liu Baohong, a supply chain management expert, told Time weekly that in the past, Apple supply chain companies in the mainland generally lacked technology accumulation and low value, making it easy for new suppliers to steal orders at lower cost prices. In contrast, some suppliers and enterprises, for four consecutive years the net profit margin remained above 40%.

Mr Li believes Apple may be more inclined to shift low-value-added supply chains, which would also make small and medium-sized suppliers more vulnerable.

In 2019, Huacai Printing, Shanghai Industrial Holdings (00363. A number of domestic companies, including HK and Hengmingda (002947.SZ), have been removed from apple supplier lists.

“Apple’s demands on its suppliers’ technology iterative capabilities and production processes are so high that a little attention may be eliminated. Strong Hengqiang, only strive upstream, sit on the head to survive. The executives said.

Rainy day.

Even companies with deep ties to Apple are trying to lay out a long-term plan to increase the leverage of future competitive games.

In recent years, China’s Apple supply chain enterprises in the capital action significantly increased. On the one hand, it accelerates the expansion of overseas capital, on the other hand, it is vertical integration upstream and downstream through investment and mergers and acquisitions.

Over the past two years, supply chain companies such as Shenzhen Tianma, Ophthalm and Puzzle Manufacturing have been actively synthing the Indian market. Gower shares, Lanth Technology, Lixun Precision and other enterprises in Vietnam set up their own factories.

In 2019, The Idea, which is intended to internationalize its strategy, will spend 680 million yuan to acquire Apple charger supplier Sercon. Despite the losses, Sercon has laid out global manufacturing bases in Brazil, India and China.

The move is considered by the industry to be “one arrow and two carvings”, not only to improve the strategic layout of listed companies in the industrial chain, but also to further strengthen the company’s international layout and layout.

On August 18 this year, Lanth Technology announced a cash-for-cash acquisition of 100% of each of its two subsidiaries, Cossing Technologies (Taizhou) and Ili Technology (Taizhou).

Cocoa Technology is a supplier of metal casings for the iPhone, and Lansing Technologies happens to be a upstream and downstream business relationship. Regarding the purpose of its acquisition, industry insiders believe that Lansing Technology is intended to apple’s iPhone foundry business.

Recently, lanth technology related person in charge told Time Weekly reporter: “Through this transaction, will achieve vertical integration and full-scale industrial upgrading, for the company to further downstream supply chain business expansion to lay a solid foundation.” “

In addition to gaining a foothold in Apple’s core supply chain by extending up and down the industry chain, Apple’s supply chain giants are looking for new growth points beyond consumer electronics.

“Domestic handset brands such as Huawei, Xiaomi, vivo and OPPO no longer see Apple as a strong competitor, both at the product innovation level and at the market level.” Mr Sun said Apple’s situation in China had actually changed.

In his view, Apple’s supply chain is no longer the best choice for all domestic suppliers, many of the original Apple-based manufacturers have begun to enter the automotive electronics, smart home and other areas with broader potential.

According to the Morgan Stanley Research Center, the self-driving car market (hardware and software that allows cars to drive themselves) will exceed $170 billion a year by 2040, providing a huge opportunity for stakeholders across the autonomous travel ecosystem.

The shift of manufacturers in the consumer electronics industry chain to automotive electronics has also begun. Mainland manufacturers in Apple’s industrial chain, such as Lansie Technologies, Changying Precision, Ophthalmonics and others, have reached out to the automotive electronics sector.

A number of manufacturers interviewed believe that the era of “Apple orderers to get the world” is long gone, in the changing situation, how to avoid risks, proactive, improve the amount of technical value and core competitiveness, is a major test for Chinese enterprises.