Citi: Apple Inc. Supply Chain Faces SoC Supply Constraints, Favors Upgrade Beneficiaries Including LUXSHARE PRECISION , LENS TECHNOLOGY , AAC TECH and SUNNY OPTICAL

Citi published a research report stating that Apple Inc. (AAPL.US) 's results for the quarter ended June showed that system-on-chip (SoC) supply constraints will increase significantly, while supply chain flexibility in the September quarter remains limited. Memory costs will continue to rise, although costs for some non-memory components will decline. Citi's latest iPhone production plan indicates that 3Q26 production remains strong, with YoY growth of 22%. iPhone 18 production in 2H26 is forecast at 81 million units, below the previous estimate of 84 million units, including 7.5 million foldable models.

Apple Inc. (AAPL.US) 's revenue and net profit for the June quarter increased 16% YoY and 22% YoY respectively, while guidance for the September quarter points to revenue growth of 9% to 11% YoY. Strong revenue growth was mainly driven by iPhone sales, up 22% YoY, and Mac sales, up 29% YoY. The company stated that SoC supply constraints will increase significantly, affecting iPhone, Mac and iPad products, as demand exceeded expectations and supply chain flexibility remained limited. The 22% YoY growth in iPhone sales was mainly driven by strong demand for the iPhone 17 series, with a higher mix of Pro models. Sales in the China market rose 22% YoY.

Regarding China's smartphone market, according to data from the China Academy of Information and Communications Technology, China's smartphone sell-in shipments in June fell 16.6% YoY to 17.1 million units, while shipments in 1H26 declined 3% YoY. Domestic brands' shipments in 1H26 dropped 6.4% YoY, but rebounded 18.7% QoQ and rose 1.1% YoY in 2Q26. Overseas brands' shipments in 1H26 increased 0.9% YoY, while rising 22.7% QoQ and 5% YoY in 2Q26. Citi believes shipment performance was supported by inventory build-up ahead of supply constraints, while the fading impact of subsidies and rising average selling prices continued to pressure sell-out sales. iPhone momentum paused from April to mid-June due to a high base effect, but recovered from late June driven by promotions.

Key upgrades for the iPhone 18 include: (1) foldable phones driving upgrades in ultra-thin glass (UTG), hinges, titanium casings and VC cooling systems; and (2) Pro and Pro Max models equipped with variable aperture main cameras. Major beneficiaries among suppliers include LUXSHARE ICT (02475.HK) -1.550 (-2.783%) Short selling $26.30M; Ratio 27.407% and LUXSHARE PRECISION (002475.SZ) -2.900 (-5.045%) , which gained market share, with supply ratios for Pro and Pro Max models at about 31% and 41% respectively, better than last year, while also securing actuator orders; LENS (06613.HK) +0.240 (+1.163%) Short selling $2.12M; Ratio 2.620% and LENS TECHNOLOGY (300433.SZ) +0.030 (+0.095%) , which supply foldable UTG; AAC TECH (02018.HK) +1.800 (+4.670%) Short selling $21.59M; Ratio 17.631% , which supplies VC cooling systems; and SUNNY OPTICAL (02382.HK) -0.500 (-0.892%) Short selling $99.54M; Ratio 22.492% , which gained lens market share and actuator orders. Foxconn remains the exclusive EMS supplier for the iPhone 18, while Pegatron and Tata only supply about 7% of the Pro Max segment.

Citi believes share price performance of smartphone supply chain companies will depend on 2Q26/1H26 results and 2H26 outlooks. Some 1H26 results are expected to outperform market concerns due to support from inventory build-up, although pressure in 2H26 may intensify. (ad/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-08-03 12:25.) (A Shares quote is delayed for at least 15 mins.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)