Half a year after its release, Vision Pro, what Apple calls a “revolutionary new product,” finally has new news.
Source: Apple
According to key sources from several consumer electronics supply chain companies, Apple plans to officially mass-produce Vision Pro in December, with a first batch of about 400,000 units in stock. The sales target is 1 million units in 2024 and 10 million units in the third year.
It is worth noting that Vision Pro goes against the norm of iPhone’s large-scale procurement of international components in recent years and relies heavily on mainland China’s supply chain. It is reported that the proportion of Vision Pro’s supply chain in mainland China is about 60%.
Considering that Vision Pro is regarded by the industry as the next generation mass computing platform, Apple's large-scale purchase of Chinese components also shows that the Chinese mainland's supply chain has an irreplaceable position in cutting-edge technology.
Coupled with the return of Huawei mobile phones a few months ago with self-developed processors and more domestic components, China's supply chain may rise strongly and become an important part of the global technology industry.
The iPhone's success is weak, does Vision Pro need to be an instant hit?
The financial report for the fourth quarter of fiscal year 2023 (third quarter of 2023) shows that Apple’s revenue from iPhone was US$43.805 billion, a year-on-year increase of 2.77%, accounting for 48.95% of total revenue; revenue from services was US$22.314 billion. , a year-on-year increase of 16.29%, accounting for 24.93% of total revenue; revenue from wearable devices, home products and accessories was US$9.322 billion, down 3.4% year-on-year, accounting for 10.42% of total revenue; revenue from Mac was US$7.614 billion, down 33.84% year-on-year, accounting for 8.51% of total revenue; revenue from iPad was US$6.443 billion, down 10.19% year-on-year, accounting for 7.2% of total revenue.
It is not difficult to find that iPhone and service business have always been Apple's most important revenue pillars. However, although both businesses are on a growth track, Apple's development anxiety has gradually become highlighted based on the market environment.
In terms of mobile phone business, judging from the background of the disappearance of the dividends of the global smartphone market, the influence of the iPhone has shown signs of peaking. Data disclosed by Counterpoint Research shows that in the global smartphone market in Q3 2023, iPhone shipments fell 9% year-on-year.
Source: Counterpoint Research
You must know that the third quarter is the time point for iPhone replacement. Against this background, iPhone shipments have declined, which also shows from the side that Apple mobile phones are no longer attractive to consumers.
Of course, due to lack of motivation among consumers to replace their phones, in Q3 2023, the shipments of the top five smartphone manufacturers will all decline year-on-year. In addition, Counterpoint Research predicts that global smartphone shipments will reach the lowest level in ten years in 2023. Against this background, many smartphone manufacturers have started "involution" competition in technology and other aspects, trying to divert the influence of other brands through innovative design.
In comparison, the current innovation of the iPhone does not seem to be amazing. Some people in the industry even said, "From the release of iPhone 15, we see an uncertain future: stagnant innovation and excessive performance...". As the degree of involution in the industry continues to deepen, iPhone may face more severe challenges in the future.
In terms of service business, it can be seen that service businesses such as Apple Music and Apple TV+ have always relied on Apple's hardware products. The decline in shipments of hardware products will inevitably cause market concerns about the future development of Apple's service business.
It is precisely because of the narrowing of imagination in the existing software and hardware business that Apple has been actively deploying new businesses in recent years. MR equipment represented by Vision Pro clearly carries Apple's hope of creating new growth points.
For Apple, although the related equipment industry as an important entrance is facing greater development resistance due to the cooling of the Metaverse, as the industry chain gradually matures, the MR market that combines the advantages of VR and AR is actually still very attractive. . PR Newswire research data shows that the global mixed reality market is expected to reach US$2.483 billion in 2028, with a compound annual growth rate of 28.7% from 2022 to 2028.
On the other hand, Apple’s existing iOS, MacOS and other ecosystems may directly empower Vision Pro.
Apple's promotional video shows that Vision Pro can be directly connected to Mac wirelessly. In addition, iOS 17.2 Beta 2, updated on November 10, 2023, also added spatial video functions. These closed-loop ecosystems can, to a certain extent, promote the rapid maturity of Vision Pro.
Source: Apple
However, it is worth noting that the iPhone’s lack of success is largely affected by the Chinese market. According to Apple’s financial report, the company’s fourth quarter revenue was US$89.498 billion, of which revenue from Greater China was US$15.084 billion, a decrease of 2.5% from US$15.47 billion in the same period last year.
Therefore, if Vision Pro wants to successfully open the market, it will undoubtedly need to win the attention of Chinese consumers, and large-scale use of mainland China's supply chain may be a key part of winning the Chinese market.
As Vision Pro is about to be mass-produced, China’s consumer electronics supply chain is rising strongly
Looking back, in the past few years, affected by macro-environmental factors, many overseas companies have begun to diversify their industrial chain layout to reduce operating risks.
For example, Apple is gradually relocating many terminal industry chains from the Chinese market. Nihon Keizai Shimbun once published an article stating that in the past few years, the proportion of supply chain components in mainland China has gradually declined in the cost of iPhone, from 4.5% of the iPhone 12 series, 3.8% of the iPhone 14 series, to 2% of the iPhone 15 series. .
In the process of relocating the industry chain, iPhone has frequently exposed quality problems. The British "Financial Times" said that an Indian factory that manufactures iPhone parts only produces about half of the cases of acceptable quality.
As consumer demand has increased and has extended to the supply chain, especially at the important time of the launch of Vision Pro, Apple has to re-embrace the Chinese supply chain.
Previously, Apple defined Vision Pro as "a revolutionary product that combines the digital world and the real world." On this basis, Apple attaches great importance to it. As Cook said at Apple's Worldwide Developers Conference WWDC23: "Mac brings us into the era of personal computing, iPhone brings us into the era of mobile computing, and Vision Pro brings us into the era of spatial computing."
Under such a high definition, the production side will undoubtedly greatly affect the market's feedback on Apple's new product. At this critical moment, the value of China's supply chain is even more prominent.
In fact, after years of accumulation of manufacturing and production experience, China's supply chain system has become very advanced and mature. Take the MR field as an example. It is understood that many A-share listed companies have plans in the complete machine assembly, parts, PC and other aspects of the MR industry chain.
For example, Lingyi Intelligent Manufacturing provides high-quality precision functional device products to downstream companies, including die-cut products, CNC products, stamping parts, fasteners, etc.; Lens Technology is involved in the production of front cover glass, camera lenses, lens films and other parts ; Luxshare Precision has excellent assembly capabilities.
Source: Apple
According to public information, the company with the highest proportion of the Vision Pro supply chain in the mainland is Lingyi Intelligent Manufacturing, which exclusively supplies cooling modules, headbands, eye masks, nose pads, etc. The value of a single machine is about US$250-300, accounting for 10% of the Vision Pro hardware. 14.71%-17.65% of the cost.
In addition, Luxshare Precision will exclusively assemble Vision Pro, with a value of around US$150-200, accounting for 8.82%-11.74% of the Vision Pro hardware cost.
Overall, the foundry costs of Lingyi Zhizao and Luxshare Precision alone can reach about 30% of the total cost of Vision Pro. Compared with the past when the iPhone was first assembled in the Chinese market, when Foxconn only earned $4 per phone, the upgrade is obvious.
It is worth mentioning that in recent years, mainland China's supply chain companies have not only made breakthroughs in key technologies, but have also frequently made large-scale acquisitions of overseas fruit chain factories. For example, in August 2023, BYD Electronics announced the acquisition of the American Jabil's manufacturing operations in Chengdu and Wuxi. It is reported that Jabil is an important member of the "Fruit Chain" and supplies structural parts for Apple's smartphones, smart watches, TWS headphones and other products.
Coincidentally, in August 2020, Lens Technology also successfully acquired two manufacturers, Kesheng Taizhou and Keli Taizhou, owned by Catcher Technology. It is understood that Catcher Technology is an alloy die-casting manufacturer in Taiwan, China. It is mainly engaged in the production, sales and development of alloys, and creates metal casings for iPhone, MacBook and other products.
As the synergy of the industrial chain becomes more and more prominent, technology giants such as Apple may place greater emphasis on China's consumer electronics supply chain. At the China Development High-Level Forum held in March 2023, Cook once talked about the relationship between Apple and China’s supply chain, saying, “This is a symbiotic relationship, and I think we all enjoy it.”
All in all, in the past few years, events such as the relocation of the "Fruit Chain" have had a great negative impact on China's consumer electronics supply chain industry, and the stock prices and performance of many companies have declined.
However, due to the potential accumulated through years of industrial upgrading, China's consumer electronics supply chain has finally emerged from the gloom since 2023. Not only has it made breakthroughs in high-end self-developed processors, but it has also regained the attention of Apple in the MR era and become a manufacturer of Vision Pro. Dominant force.
It is foreseeable that, driven by leading manufacturers such as Huawei and Apple, China's consumer electronics supply chain will become increasingly influential in the global technology industry.
Author: Tianyu
Source: US Stock Research Institute