Taipei, Dec. 2 (CNA) Taiwanese contract manufacturer Pegatron Corp. could get most of Apple Inc.'s orders for the next-generation 4.7-inch iPhone next year as the Cupertino-based company continues to diversify its supply risk, according to a foreign brokerage.
"For the next product cycle, iPhone 6S, likely out in September 2015, we believe for the first time in the iPhone history, Pegatron will become the main source for assembly, with more than 50 percent of the 4.7-inch allocation," the European brokerage said in a note to clients on Monday.
Apple changed its outsourcing strategy after Tim Cook took over as CEO in 2011, when the iPhone maker began to increase supply partners to reduce supply risk and gain leverage in pricing negotiations, the firm said in the note.
Because iPhones are very difficult to assemble due to their complexity, Apple's contract manufacturing partners tend to lose money in the first one or two years of their iPhone business until their yield rates improve, according to the brokerage.
Apple first chose Pegatron to start assembling the iPhone 4S in 2012, then gradually expanded Pegatron's orders to the iPhone 5C in 2013 and iPhone 6 in 2014, the brokerage said, adding that the vendor currently churns out 30 percent of the 4.7-inch iPhone 6.
Taiwan-based Hon Hai Precision Industry Co., also known as Foxconn Technology Group, has received 70 percent of the orders for the 4.7-inch iPhone 6 and all of the orders for the 5.5-inch iPhone 6 Plus this year.
Aside from Pegatron becoming the main supplier of the 4.7-inch iPhone 6S, "there is also a small possibility that Pegatron will win the 5.5-inch model as well, but this remains to be seen," the research note said.
On the back of the strong iPhone outlook, the European brokerage raised its price target for Pegatron to NT$88 (US$2.83) from NT$75 and gave the stock an "overweight" rating.
Pegatron shares rose 1.78 percent to NT$74.50 in Tuesday morning trading in Taipei.
(By Jeffrey Wu)