Apple launched its 2nd-gen iPhone SE, the successor of iPhone SE launched in 2016, with spec largely in-line with expectations. The launch timing was delayed to mid-April from original mid-March due to COVID-19 outbreak and supply chain disruption. Given recent COVID-19 impact and consumer demand weakness, we consider 2nd-gen iPhone SE as a low-volume model and estimate 10mn/20mn shipment in 2Q20E/FY20E (vs 20mn for iPhone SE in FY16). Overall, we expect Apple supply chain will continue to face challenges in 2Q/3Q20E, and recent weak 2Q guidance from TW/US supply chain will put the sector under pressure in near term, including AAC Tech, Cowell, Goertek, FIT Hon Teng and Lens Tech.
- New iPhone SE spec largely in-line; Expect 20mn FY20E shipment. This entry-level iPhone SE adopted similar design/spec of iPhone 8 in 2017. Key highlights include a 4.7-inch LCD display, Touch ID home button (instead of facing recognition), wireless charging, A13 Bionic chipset (same as iPhone 11 in 2019), single 12MP rear-camera, and starting retail price of US$399 (same as iPhone SE in 2016). We consider this 2nd-gen iPhone SE as a low-volume model and estimate 10mn/20mn shipment in 2Q20E/FY20E (vs 20mn for iPhone SE in FY16). This model will account for 11% of iPhone FY20E shipment (175mn), which is too small to move the needle in our view.
- 5G iPhone to launch in Nov/Dec; Product cycle to extend into 1H21E. We believe market remains focused on rollout timing of the four flagship 5G iPhones in 2H20E. Our check suggested that it is extremely unlikely to launch at Sep-Oct timeframe, given supply chain disruption and delay of EVT/PVT for new production lines in China. Therefore, we expect 5G iPhones to launch in Nov-Dec timeframe in order to catch the holiday season. Given recent COVID-19 impact in US/Europe (40%/21% of iPhone sales), we estimate iPhone shipment will decline 25%/8%/1% YoY to 26mn/ 43mn/73mn in 2Q/3Q/4Q20E.
- Stay cautious in near term; Another round of earnings cut ahead. Overall, we remain conservative on tech names (esp. consumer electronics) in 2Q20E. US/TW tech supply chain will start to report earnings in coming two weeks (TSMC 16/4, Intel 23/4, QCOM on 29/4, Apple on 30/4), and we expect weak 2Q20E guidance will continue to put the sector under pressure in near term. We maintain our Sell rating on AAC and HOLD on Goertek and BYDE.
