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  • jaretwilson jaretwilson Jan 20, 2013 4:33 PM Flag

    going forward

    There seems to be some concern about the first quarter, but that concern is way overblown.

    The first quarter will be weaker than the fourth quarter for Apple. That's normal! Companies that sell to western consumers usually do best in the third and fourth quarters because of the Christmas season, and worst in the first quarter. It's not surprising that Apple's volume would be down.

    For Nam Tai the third quarter had one weak month of iphone LCM production and low volume ipad production, and yet was still very profitable. The first quarter will have three months of iphone LCM production instead of one, so unless it's less than one third the already low rate of September, then the first quarter will still have higher iphone revenue.

    Also, far too much is being made of Apple, while other customers are being ignored. In the second quarter, with $205M revenue, 44% was from Apple, while in the third quarter, with $380.5M, 38% of revenue was from Apple products. How can that be, that the revenue from Apple increased and yet revenue from other customers would seem to have increased even more?

    I can see three main reasons:
    1) Hitachi. Last year, Toshiba Mobile Display was 32.3% of revenue, Sony Mobile Display Corporation was 30.7%, Sharp was 10.5%, and Sony Computer Entertainment Europe Ltd. was 10.4%. Japan Display is a combination of Toshiba, Sony, and Hitachi. Note that Hitachi was not previously a customer. The creation of Japan Display in 2012 effectively added a new customer, and Nam Tai may now be getting business from the factories that used to belong to Hitachi.
    2) Sony's mobile phone division. As I've said before, last year Sony went from 6th in smartphones to 3rd. That's not a small advance. Note that Sony was the largest customer last year (between the two separate divisions.) Presumably every Sony phone uses a Sony (now Japan Display) LCD screen, whereas with Apple only a small portion of iphone screens pass through Nam Tai, so growth in Sony means that much more. Sony produced around 35M phones in 2012, and hopes to produce 50M phones in 2013. Not only that, but the average screen size is increasing, and the larger the screen the more revenue Nam Tai gets.
    3) Growth. Automotive displays (61.7M in 2012) are growing around 20% per year, and Sharp and Japan Display are the two dominant companies there. Tablets and smartphones are obviously doing quite well also.

    We'll know more about how the first quarter will look soon, but don't make the mistake of thinking that Apple is more important than it is. Even a "slow" first quarter should be a huge amount of revenue considering how low the stock price is. We also know that they are in talks for a new product with existing customers, and I think we'll hear more about that during this quarter.

    Sentiment: Strong Buy

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    • Listen to the 8 min mark of the Q3 CC. The smartphone display that they started production in Aug is 5 inch and the customer is Japan Display.

      • 2 Replies to john429a
      • John,

        Great catch on this. I was in the camp that thought the smartphone production was for the iphone 5, but this statement would inidcated otherwise. The iphone 5 has a 4-inch display not 5-inch.

        The JDI 5-inch display looks to have some pretty exciting buzz to it. Sony's new phone that has been mentioned several times on this board does have the 5-inch display from JDI.

        It looks like Q1 revenues will be much stronger than it seemed after the Apple supply chain news last week.

        At the end of the day, I don't care who NTE makes LCD modules for as long as they fill up the factory capacity and keep it full.

      • Also price of the LCD module is $28 to $35 which depends on the model of the LCD. Their are multiple LCD's. i.e. more than just Apple. Go listen to the conference calls.