Increased shipments of Apple’s iPhones will be a key “volume driver” for the supply chain, according to Morgan Stanley. Consumers have been replacing their iPhones less often — an average of every five years from 3.7 years in 2021, according to the bank. But the situation is set to change, with Apple Intelligence predicted to be a “key iPhone replacement driver.” Apple announced its Apple Intelligence feature , its take on generative artificial intelligence, last month. It will support only the 2023 iPhone 15 Pro Max and iPhone 15 Pro, not the regular iPhone 15, and is already said to be able to help drive new iPhone upgrades when it launches this fall. “iPhone shipments increase is a genuine volume driver to the supply chain for 2H24 onward, especially after muted shipment strength in the past two years,” Morgan Stanley said in a July 14 report. The bank estimates that 215 million iPhones will be shipped in 2024, with the number set to rise 9% year on year to 235 million units in 2025. If iPhone shipments do improve in the next few quarters, Morgan Stanley believes key beneficiaries in Asia will include Hon Hai , Largan , Luxshare , Genius , AAC and Foxconn Industrial Internet . That’s thanks to their large revenue exposures to the iPhone. It raised its price targets for several stocks in the Apple supply chain. Here are some of the key beneficiaries it named. The bank likes Taiwan-listed Hon Hai the most for its dual growth drivers of iPhone assembly and AI servers. “We expect Hon Hai to retain its iPhone assembly share at ~63%, given its solid time-to-market delivery and accelerated output from new production sites in India,” said Morgan Stanley analysts. They estimate its iPhone assembly revenue will grow 13% year on year in 2025 and 10% year on year in 2026. Morgan Stanley said Luxshare’s Apple exposure is 70% to 80% of its total revenue, given key component upgrades for the iPhone’s AI features. “Luxshare remains a good proxy to play the upcycle of Apple hardware devices,” the bank said. Foxconn Industrial Internet will continue to supply titanium metal casings for the upcoming iPhone 16 Pro and Pro Max models at its Zhengzhou and Ganzhou plants in China, according to Morgan Stanley’s supply chain checks. That, along with the firm’s “rapid progress” in AI data center infrastructure offering, will drive up its profit by 27% year on year in 2025 and 14% year on year in 2026, said Morgan Stanley. Largan reported first-quarter revenue that was below expectations but Morgan Stanley believes that was the trough. “The 2H24 shipment outlook looks more promising, though, with more larger-size and high-end new products. Therefore, we think the trough gross margin will represent an attractive buying opportunity,” the bank said. Morgan Stanley said Genius has a “good chance” of making a breakthrough in the periscope high-end lens segment in the second half of this year. That could boost its competitiveness, the bank said. The bank said that a couple of “recovery drivers” for AAC could unfold this year. That includes a “continual improvement” in yield and margin for wafer level glass, a lens technology produced by AAC. — CNBC’s Michael Bloom contributed to this report.
