Japan supplier shares fall after Apple unveils lower-cost phone

Reuters News
Posted: Sep 10, 2013 11:18 PM
Japan supplier shares fall after Apple unveils lower-cost phone

TOKYO (Reuters) - Shares of Apple Inc's component suppliers in Japan fell on Wednesday on concerns that its lower-cost iPhone is still too expensive for its target audience in emerging markets and could crimp their margins.

"In terms of components, it's all a volume game with low margins. It's not a huge positive for component makers," a senior dealer at a foreign bank in Tokyo said.

Among the Japanese component makers, Taiyo Yuden Co Ltd, Murata Manufacturing Co Ltd and Ibiden Co Ltd were down between 1.4 and 2.9 percent.

Other part suppliers including Mitsumi Electric Co Ltd, Japan Aviation Electronics Industry Ltd, Minebea Co Ltd and Nidec Corp, were off between 1.6 and 3.3 percent.

Another trader disagreed that margins were under threat, saying Apple has long been squeezing its part suppliers so if the tech giant can increase sales, it would benefit component makers as well.

"It's not negative for the component makers because it's about volume. If anything, it is positive for component makers because you are now arguably going to be selling even more iPhones," he said, adding that the selloff in the Japanese component makers offered buying opportunities.

"The potential you've got here is not that you are going to be selling fewer iPhone 5s...What you are doing here is attacking a brand new market," the trader said. "Now they have come up with a mid-range phone because there is a huge market for entry level smartphones."

On Tuesday, Apple unveiled its iPhone 5s with a fingerprint scanner to help it stand out among the smartest of phones. It also introduced a cheaper, colorful plastic model for emerging markets that proved pricier than expected.

The entry-level "iPhone 5C" starts in the United States at $99 with a contract, or $549 without. Apple has been losing ground to Samsung Electronics Co Ltd and Huawei Technologies Co Ltd in emerging markets, such as China and India.

According to Thomson Reuters StarMine, suppliers Taiyo Yuden, Murata and Ibiden were 13 to 36 percent below their intrinsic value, which evaluates a stock based on projected growth over the next decade, using a combination of analyst forecasts and industry growth expectations.

(Reporting by Dominic Lau; Editing by Matt Driskill)