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How the iPhone’s success will boost Samsung & LG stocks

October 20, 2014

The iPhone’s dependence on Korean parts suppliers such as Samsung and LG will help boost revenue and therefore their stocks. (Yonhap)

By Kim Yoo-chul

With Apple’s large screen iPhone 6 Plus now being available in China, Korean parts suppliers to the U.S. company are expected to be beneficiaries of the so-called Apple effect, analysts said Monday.

SK hynix, Samsung Electro-Mechanics, LG Display and LG Innotek are companies that will see their stock prices receive a boost from iPhones’ strong performance on the global market, they said.

IM Investment Securities analyst Lee Min-hee has named LG Display, the display-making affiliate of LG, as the brokerage’s “top-pick” to benefit most by the release of the Apple phones.

“The big difference in the latest iPhones are the larger display screens at 4.7 and 5.5 inches, meaning that LG is positioned to ask for more payments for its displays sold to Apple,” Lee said in a report to clients.

Kwon Seong-ryeol at Dongbu Securities in Seoul said new iPhones will help the LG affiliate boost the sale of mobile panels by 40 percent more during the third quarter of this year from the previous quarter. “LG Display will see a re-rating on its shares from the fourth quarter of this year,” said Kwon.

Apple received a record 4 million first-day pre-orders for the new phones, double the number for the iPhone 5 two years ago.

The two Apple iPhone variants will be offered by more than 200 carriers worldwide, with sales launching in developed and key emerging markets.

News that a supplier has been chosen, or rejected, for one of Apple’s products can sometimes cause drastic swings in stock prices.

Apple normally doesn’t disclose which companies make the components that go into its smartphones. It also imposes strict rules forbidding its suppliers from discussing Apple-related business with investors and the media.

LG Display declined to comment on Apple-related issues.

With LG Display, analysts chose LG Innotek, a component unit of LG, as another winner of the “Apple effect.”

Innotek supplies camera modules to the Cupertino-based outfit.

Ha Joon-doo from Shinhan Financial expects LG Innotek to generate more than 2 trillion won from Apple business as some 30 percent of Innotek’s corporate annual profit is coming from the iPhone designer. Innotek spokesman said it’s been diversifying its clients beyond one specific firm.

How Samsung, SK hynix will reap rewards

Like previous iPhones, the latest Apple phones use mobile DRAM chips supplied by Samsung Electronics and SK hynix, said research firms, meaning the world’s top two memory chip suppliers are well-situated to take bigger rewards from Apple.

DRAMeXchange, the biggest memory chip-tracking site in Asia, said the portion of mobile DRAMs, a critical component of smartphones and tablets, out of total memory chip demand will rise to 25 percent next year from an estimated 16.5 percent this year.

As Samsung Electronics and SK hynix are long-time chip partners for Apple, the two are investing more on premium memory chips such as mobile DRAMs at their key factories in Korea, said officials.

Baek Ji-ho, an executive at Samsung’s memory chip buiness, recently said the world’s biggest memory chip supplier is looking at the possibility of increasing the output of mobile DRAMs at its S3 plant in Korea to meet the rising demand for Apple phones.

SK hynix also plans to shift its M10 memory chip line into a mobile DRAM-only fabrication site to boost its Apple business, said the research firm.