Our Theme of Apple Component Supplier Stocks, which includes a diverse set of companies that supply components for Apple’s devices, has declined by about 14% year-to-date, roughly in line with the S&P 500, although it has underperformed Apple stock (NASDAQ: AAPL), which remains down by just about 7%. While surging inflation has prompted the Federal Reserve to hike interest rates at a more aggressive pace, leading to a sell-off in growth sectors such as technology, Apple suppliers have also been impacted to an extent by the semiconductor shortage, and Covid-19-related disruptions in China and Southeast Asia.
However, things could look up a bit in the coming quarters. The semiconductor supply crunch is showing some signs of easing and this could help the companies in our theme to an extent. Apple is also expected to introduce its new iPhones (likely called iPhone 14) around September and this could also prove a catalyst for supplier stocks. The new smartphone is expected to feature more substantial upgrades and possibly design changes versus the iPhone 13, boding well for suppliers from a component content per-device perspective. There also remains a real possibility that Apple will hike prices across its iPhone line-up to offset cost increases. For perspective, the updated iPhone SE launched earlier this year saw its prices hiked from $400 to $450 and it’s likely that we could see this for Apple’s latest devices, as well. This could potentially help Apple’s vendors. Separately, the broader industry transition to 5G wireless networks is also likely to help Apple’s suppliers, who are largely focused on wireless chipsets and related semiconductors. For example, Android device vendors have been looking to equip more of their mid-range and lower-end models with 5G capabilities.
With inflation rising and the Fed raising interest rates, Apple has fallen 7% this year. Can it drop more? See how low can Apple stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||0%||-13%||85%|
|Trefis Multi-Strategy Portfolio||3%||-10%||253%|
 Month-to-date and year-to-date as of 8/8/2022
 Cumulative total returns since the end of 2016