iPhone 17e and M4 iPad Air debut with aggressive value proposition is positive to Apple supply chain

iPhone 17e and M4 iPad Air debut with aggressivevalue propositionis positive to Apple supply chain Apple announced the iPhone17e and the M4 iPad Air, with spec/featureslargelyin-line with market expectations. That said,we have identified several majorpositives:1) iPhone 17e:thesame starting price at US$599 while doubling basestorage to 256GB(vs. 128GB starting iPhone16e storage);2) M4 iPad Air:massive performance leap with M4chip,an increased 12GB of RAMand N1/C1Xconnectivity chips at unchanged starting prices (US$599 for 11inch, US$799 for13inch);3) Verticalintegration: the debut of Apple's C1X modem and N1networkingchipwillacceleratetransition from third-party silicon, andincreasingadoption of in-house components will be positive to gross margin and supplychain management.Overall, we believeupdates to iPhone17e and M4 iPad Airshouldstrengthen Apple’s position inmid-endsmartphone and tablet segments,particularlyin the midst ofindustry memory cost pressure.Holding stable pricesand product updates with latest specshouldattract more consumerstoAppleecosystem,compared to competitors’ price hike, de-spec or product launchdelays amid memory cost pressure.For supply chain, we prefer content/sharegainers with highApple sales exposure, such as Luxshare(iPhone/WatchOEM/acoustics/haptics),FIT Hon Teng(connectors/AirPods),andAAC Tech(acoustics/haptics/VC). China Technology Sector Alex NG(852) 3900 0881alexng@cmbi.com.hk Hanqing LIlihanqing@cmbi.com.hk Key spec/features in-line; Aggressive value proposition for iPhone 17e.Apple launched iPhone 17e with 3nm A19 chip, a single 48MP Fusion rearcamerawith 2x optical-quality zoom,Ceramic Shield 2,and MagSafesupport. We believe maintaining US$599 price point while doubling the basestorage to 256GB is a highly aggressive move that is better than feared andwill be positive to replacement demand among budget-conscious users. Theinclusion of the new C1X cellular modem-up to2x fasterinspeedand 30%better power efficiency thanpriorgeneration-is a key highlight. The devicewill start pre-orders on 4 March with availability on 11 March. M4 iPad Airbrings Pro-level performance to the mainstream.The newM4 iPad Air offers a significant performance boost overpriorgeneration,featuring M4 chip and a 50% jump in unified memory to 12GB. This memoryupgrade is strategically designed to run complex Apple Intelligence modelsfaster on-device. The addition of Apple's N1 wireless chip for Wi-Fi 7 and C1Xmodem further enhances connectivity. We believe this new line-up is poisedto boost replacement demand for users seeking powerful AI and creativecapabilities without iPad Pro price tag. Recommend to accumulate on recent weakness.Top picks: Luxshare,FIT Hon Teng, AAC Tech.We expect restocking and market share gainswith this budget iPhone and mid-tier iPad will be positive to Apple supplychain in 1H26E, and product launchesin2H26E(iPhone Fold, iPhone 18upgrade Siri) will drive stronger upgrade cycles in 2026-27. We prefer Applenames with content/share gains, such as Luxshare (iPhone/Watch OEM/acoustics/haptics), AAC Tech (acoustics/haptics/VC),andFIT Hon Teng(connectors/AirPods). Focus Charts Source:Apple,CMBIGM Source:Apple,CMBIGM Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part,certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensationwas, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and FuturesCommission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 months: Stock with potential return of+15% to-10% over next 12 months: Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM HOLDSELLNOT RATED :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over