When Apple last reported quarterly earnings, it adjusted its revenue guidance for 2016 down, suggesting that its incredibly profitable iPhone business had peaked.
Now, according to supplier checks performed by Wall Street analysts, it looks as if Apple has already gotten past the worst of its slump. The companies that provide parts to Apple have suggested they are producing as much as ever.
From a report by Credit Suisse:
The CS Asia Tech Team has noted that the iPhone supply chain orders are indicating things may be better than feared. In our view, this improvement could be the first positive movement since the Apple iPhone supply chain cuts began late last year ... with high retention rates, continued installed base growth, and the optionality of a smaller 4-inch iPhone, Apple remains an Outperform.
The analysts raised Credit Suisse's earnings-per-share estimates for Apple. The reversal in supply-chain sentiment is notable because suppliers gave the first signs that iPhone sales could decline late last year.
But which suppliers have signaled the all clear? A good place to start is Dialog Semiconductor, which provides power-management chips to Apple. Apple, in turn, provides it with a majority of its revenue — 80%, according to Bloomberg in 2014.
Dialog Semiconductor provided guidance while reporting earnings earlier this week, and it was notably bullish. From the Outlook section of a recent press release:
We continue to expect single digit year-on-year overall revenue growth for the full year 2016 and anticipate continuing strong momentum from our connectivity and power conversion products through 2016. As with previous years, revenue performance will be strongly weighted towards the second half of the year.
"Second half of the year" indicates it's expecting a big upgrade cycle for the iPhone 7, presumably based on orders it has received from Apple.
As Credit Suisse mentioned, Apple is expected to release a new smaller iPhone later this month. Estimates for its first-year sales are about 10 million.
