KGI: 3 new iPads to debut next quarter will slow decline in sales, 10-10.5 inch model wildcard

In a new report out this morning from noted analyst Ming-Chi Quo at KGI Securities, we find the size of the new iPad form factor, expected in Q2 still in flux indicating that Apple may still be deciding between different sizes.

The new models will come in 12.9”, 10-10.5” and 9.7” versions. We note the 12.9” model will be the second generation of the existing 12.9” iPad Pro, the 10-10.5” model will be the high-end model equipped with a narrow bezel design, and the 9.7” model will be the low-priced option. The former two models will have an A10X chip manufactured by TSMC (2330 TT, NT$183.5, N), while the latter comes with an A9 chip made by Samsung LSI. Although we estimate iPad shipments in 2017 will drop again YoY to 35-37mn units, we except the decline to narrow to 10% from 2016’s roughly 20%, given that the 10-10.5” model may see more demand from commercial/ enterprises and tender markets, while the low-priced 9.7” model may have a greater shipment contribution and likely account for 50-60% of total shipments of new iPads.

Perhaps most interesting for AAPL stockholders is the psychological impact of iPad sales leveling off and greater ASP…

Kuo still expects numbers to be down slightly year over year but the higher ASP to make up for that in revenues.

Worst has passed for Apple’s iPad. This is due to: (1) the YoY shipment decline will narrow in 2017F versus 2016; (2) a better ASP thanks to improved product mix on decreasing exposure to iPad mini will likely offset the shipment decline; and (3) an improved cost structure due to an increasing number of suppliers of touch-module lamination and DDI.

Samsung also appears to be a winner in this latest round of iPad

Among DDI suppliers of the new iPad models, new entrant Samsung LSI (KR) is the biggest winner, while the shipment schedule and order allocation of new entrant Parade (4966 TT, NT$319.5, NR) will likely fall short of expectations due to quality issues…Samsung LSI & Parade to become new DDI suppliers for new iPad models, stemming Silicon Works’ monopoly. In terms of order allocation, Samsung LSI and Parade have the orders of 12.9” and 10-10.5” iPad models, while Samsung LSI and Silicon Works have the orders of low-priced 9.7” model.

MacOtakara has predicted similar sized iPads in the same time period but their estimates are the screen can grow to be as big as 10.9-inches.  These larger screens will likely be in the same or similar sized enclosures as the current 9.7-inch iPads.  Meanwhile the Samsung produced 9.7-inch iPads will likely be low end legacy models.

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