In the evening, I listened to a conference call from a certain sell-side firm regarding the Apple supply chain, as consumer electronics is also a sector I track closely. Here are the main points summarized:
Core Conclusions:
- Short-term disruptions are inevitable, but substantial impacts are limited: The upcoming US Section 232 semiconductor tariffs (potentially as high as 100%) have raised market concerns, but based on historical experience (frequent exemptions) and the low proportion of US semiconductor exports (about 1%), the actual impact is manageable.
- Apple is responding proactively, with expectations for exemptions strengthening: Apple has announced an additional $100 billion investment in the US, clearly aimed at securing tariff exemptions. Coupled with investments from giants like NVIDIA and Samsung in the US, the path for the supply chain to avoid tariffs through localized production is becoming clearer.
- The valuation of the Apple supply chain is significantly underestimated, diverging from the innovation cycle: Since the tariff fluctuations in April, the valuations of core Apple supply chain companies have plummeted significantly, currently corresponding to a 15-20 times PE ratio for 2026 earnings, which is notably lower than other major technology sectors (such as computing power) and does not adequately reflect the strong innovation cycle expected in the next 2-3 years.
- Multiple factors catalyze valuation recovery: The implementation of tariffs (elimination of uncertainty), the release of the iPhone 17 (hardware and software upgrades), low market expectations (Apple’s lag in AI), and the concentrated innovation expected from 2025-2027 (foldable screens, edge AI, the 20th anniversary new device, AI glasses, etc.) all contribute to upward momentum.
- Supply chain resilience and regional division of labor are clear: Apple is diversifying risks through a capacity layout of “China (main) + Southeast Asia (secondary) + India (incremental).” Core modules and components still heavily rely on the Chinese and Southeast Asian supply chains. Future US domestic investments may focus on specific areas such as chips, automated production lines, and servers.
- Recommendation logic: Focus on core targets that currently possess low valuation safety margins + deep participation in the next generation of innovation + actively expanding new growth points (such as AI hardware).
Detailed Analysis and Projections:
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Background and Projections of Tariff Policy:
- The Trump administration plans to impose high tariffs (proposed 100%) on non-US manufactured chips (focusing on power management chips) and chip-containing terminals (phones, PCs, servers, etc.), with the expected implementation window in the coming week.
- Historical analogy: The 2018 steel and aluminum tariffs (starting at 25%) were gradually increased; if the semiconductor tariffs are directly implemented at 100%, it would represent a significant escalation. However, the key lies in the frequent historical exemptions (exemptions in 2018, and exemptions immediately after being included in April 2025).
- The policy cycle is shortened: This time, it took only about 4 months from the initiation of the Section 232 investigation to potential implementation, which is faster than in the past (usually about 1 year), reflecting political urgency, but also means that subsequent corrections (such as exemption applications) may accelerate accordingly.
Potential Impact Assessment:
- Apple Inc.: Core initiative. Announced an additional $100 billion investment in the US (building on an existing $500 billion base) aimed at enhancing domestic manufacturing capabilities to secure exemption eligibility. This sends a strong signal to the market about its intent to mitigate tariff risks.
- NVIDIA, Samsung: Similarly investing in US factories (wafer fabs, packaging), also strategically positioning to avoid supply chain risks and seek policy benefits (such as CHIPS Act subsidies and potential tariff exemptions).
- Inference: The core products covered by tariffs (especially phones and PCs) are unlikely to achieve full self-sufficiency through domestic manufacturing in the US due to poor economics. A more realistic path is: Brand owners invest locally at a certain scale (chips, some automated hardware, servers, etc.) to exchange for tariff exemptions on end products (especially consumer electronics). The supply chain pattern of Apple being “China (main) + Southeast Asia/India (secondary)” will continue.
- Semiconductor exports: The proportion of semiconductor exports from mainland China to the US is only about 1%, so even with a 100% tariff increase, the direct impact is minimal.
- End products (phones/PCs/servers): Apple, HP, Dell, and other brand owners are the main bearers. Apple has already taken clear actions (as seen below).
- Direct impact is limited:
- Corporate responses and expectations for exemptions:
Current Status and Valuation Analysis of the Apple Supply Chain:
- Valuations have been significantly pressured since April: Concerns over tariff fluctuations have led to a sharp decline in the valuations of leading Apple supply chain companies, such as Lens Technology and Luxshare Precision, which currently correspond to about 18 times PE for 2026 earnings.
- Insufficient recovery momentum, lagging behind: Even with occasional positive news (such as short-term exemptions), the extent of valuation recovery has been limited, significantly lagging behind technology sectors like cloud computing and computing power during the same period.
- Current valuation cost-effectiveness is prominent: Compared to the expected earnings growth rate for 2026 and the certainty of future innovations, the current valuation level already possesses significant safety margins.
Future Catalysts and Innovation Cycle:
- Micro-innovations in iPhone 18 (VC uniform heat plate, variable aperture technology, etc.).
- Apple’s 20th anniversary flagship new device (expected in 2027): Major innovation expectations.
- Layout and positioning of AI glasses products.
- Launch of foldable iPhone: Core increment, involving hinges, UTG ultra-thin glass covers, 3D printed structural parts, etc., significantly increasing the value per unit.
- Implementation of edge AI functions: Releasing demand for computing power on devices.
- New iterations of AirPods products.
- Progress of tariff policy implementation and subsequent exemption applications (elimination of uncertainty).
- Release of the iPhone 17 series: Although AI functions on the software side may be delayed (until 2025), the hardware side has already been adapted for AI (such as PCB upgrades, enhanced VC uniform heat plates, ultra-thin bodies, new metal + glass back covers).
- Short-term (next few months):
- Medium-term (2025):
- Medium to long-term (2026-2027):
Supply Chain Structure and Risk Diversification Strategies:
- Current pattern is solid: The assembly of mature products such as phones (80% from mainland China, 20% from India) and iPads (about 50% from mainland China) still heavily relies on the Chinese and Southeast Asian (e.g., Vietnam) supply chains for upstream modules/components manufacturing.
- Response strategy – Regional matching: Utilize production capacity outside mainland China (such as 20% of mobile phone production in India, and other assembly lines in Southeast Asia) to supply the US market demand, thereby hedging potential tariff costs. The supply chain structure will not undergo disruptive changes.
- Role of the US: New investments may focus on chip manufacturing/packaging, highly automated production lines, and server assembly. Large-scale repatriation of consumer electronics manufacturing to the US is economically unfeasible and also inconsistent with Apple’s existing strategy.
Recommendation Logic Summary:
Carefully select high-quality companies that possess low valuation protection, core benefits from next-generation product innovations (especially foldable screens, AI hardware upgrades), and actively expand into high-growth markets such as cloud AI:
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Luxshare Precision:
- Valuation: Expected profit of about 20 billion yuan in 2026, current valuation is about 13 times PE.
- Logic: Solid core position in Apple’s supply chain. New highlights: Entering the supply chain for NVIDIA’s GB200 GPU backplane connectors and cables, entering the cloud AI hardware track, opening up a second growth curve.
Lens Technology:
- Valuation: Expected profit of about 6 billion yuan in 2026 (corresponding to about 14 times PE in the Hong Kong stock market).
- Logic:Core beneficiary of foldable screens. Deeply involved in key aspects such as UTG covers and hinge components for the new foldable iPhone (expected in 2025), with high technical barriers and significant increases in unit value.
Sunny Optical Technology:
- Valuation: Expected profit of about 4.5 billion yuan in 2026, current valuation is about 20 times PE.
- Logic: Continuous increase in market share for mobile phone lenses (especially under the backdrop of slowing Android growth, the stability of the Apple supply chain is superior). Clear path for profit recovery (improved industry competition landscape, new project increments). As an optical leader, it is also expected to benefit from Apple’s edge AI upgrade demand for image sensors.
Lingyi Technology:
- Valuation: Expected profit of about 4 billion yuan in 2026, current valuation is about 16-17 times PE.
- Logic:Core target for the significant increase in foldable screen value. Provides cooling solutions for foldable screens, precision structural components for hinges, carbon fiber support components, etc., with expected unit value reaching $80-90, which is 2-3 times higher than traditional flat-screen devices (huge increment).New growth points: Actively entering the supply chain for NVIDIA’s GB200 liquid cooling modules (also laying out optical module cooling), positioning in the AI server cooling track.
Lantech Optical:
- Valuation: Expected profit of about 500 million yuan in 2026, current valuation is about 20 times PE.
- Logic: Core supplier of Apple’s prisms, with significant technical advantages. Benefiting from the increased penetration of optical innovations (such as hybrid lens technology) in mobile phones and potential new hardware (such as AR/VR).
Although the short-term US semiconductor tariff policy brings disruptions, based on the limited substantial impact, proactive responses from giants like Apple to seek exemptions, and the resilience of the supply chain, we believe that the market’s excessive concerns about the Apple supply chain have led to significantly low valuations. Looking ahead to the next 2-3 years, the hardware innovation cycle from Apple (foldable screens, edge AI, 20th anniversary new devices, AI glasses, etc.) is clear and intensive, which is expected to drive performance growth and valuation recovery for core supply chain companies.
At this point,Luxshare Precision, Lens Technology, Sunny Optical, Lingyi Technology, and Lantech Optical are targets that combine low valuation protection, innovation flexibility, and new growth highlights, and are recommended for close attention.