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Apple is widely expected to follow tradition and release a new line of iPhones later in the year. Word on how the iPhone 8 will look, though speculative so far, suggests some major changes from earlier models. Forecasters expect three variations of the phone, all of which will feature OLED displays, for example.
This means that Taiwanese companies which would usually be contracted by Apple to make iPhone parts or do final assembly aren’t sure what will be required of them this year, tech analysts say.
The stakes are obviously high if a lot of today’s estimated 660 million iPhone users decide to replace what’s in hand now with a new model. Smartphone users switch on average to a new handset every 30 months, says Yen Cheng-hui, an economist with the Yuanta Polaris Research Institute in Taipei, and it's predicted that a lot of iPhone users will drop their 6s for 8s. “Two generations ago happened to be the iPhone 6 generation and at that time, related growth exploded,” Yen says. “In addition, the iPhone’s specialty is very high user loyalty, so the replacement wave for this generation of replacement will be higher than before.”
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How much juice Taiwan’s thirsty economy could get from a frenzied exchange of old phones for new ones matters because about one-fifth of the $519 trillion GDP depends in some way on high-tech, often hardware contracting.
On the plus side, Taiwan’s high-tech hardware firms will probably get a piece of all three would-be iPhone 8 models, says Sean Kao, a research manager with tech market analysis firm IDC in Taipei. Thirty-six companies from Taiwan will have some role to play in building these handsets, Taipei-based Market Intelligence & Consulting Institute says. That's about the same level of participation they saw in years past, the institute says.
Pegatron Corp. of Taiwan will assemble a 5.5-inch iPhone 8 version as early as this quarter, Kao says. Hon Hai Precision, the world’s biggest electronics contract manufacturer and based in Taiwan, will assemble another iPhone 8 model, he believes. Taiwanese lens module developer Largan Precision might make rear cameras for the phones, Kao says. That fate would leave the front cameras up for grabs. Orders to Taiwan for printed circuit boards (PCBs) may increase, the IDC analyst adds.
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The iPhone 8 is rumored to use OLED display panels, according to tech media reports. Samsung Display in South Korea and Japan Display Inc. will supply Apple’s 2017 run, bypassing Taiwan, Kao says. Taipei-based TPK Holdings had reportedly made panels for earlier iPhone models. The consulting institute picks TPK to provide 3D touch technology this year and TSMC to make A11 processors.
Apple never comments on its contractors, which in turn don’t talk about their orders from Apple.
iPhone orders are expected to bounce around a bit this year due to uncertain demand for the 8's new specs on the back of tough sales last year. Additionally, no one knows the 8's release dates or unit prices.
Taiwan’s Apple contractors may not be ready for sudden shifts in orders this quarter save for items such as camera lenses that they’re used to making, Yen says. In some cases they can only wait for demand to come “bit by bit,” he says. Someone such as Pegatron would be set back if Apple decided to scale back production due to quirks in demand, Kao says.
After patchy iPhone sales last year, it's hard to forecast how many people will want the 8 or what prices they’ll want to pay. Shipments of iPhones will probably reach 220 million this year, up 5 million from last year, Market Intelligence & Consulting Institute analyst Aaron Lin says, but that figure will hinge on launch dates and prices. The release of three models, not fewer, should give Taiwan component makers “a meaningful boost” in shipments, his research firm says, but all of that hinges on Apple's final plans. Until those are confirmed, manufacturers will be left in the dark.
