The latest research notes from Apple Analyst Ming-Chi Kuo states that supplier Largan will remain Apple's exclusive supplier for the iPhone tetraprism zoom lens in 2024. Kuo expects Apple will expand their Tetraprism lens to the iPhone 16 Pro, beyond just the Pro Max. Below are Kuo's main research points:

• Market consensus significantly underestimates Largan’s EPS for 2023/4Q23. Due to significant improvements in the yield of the tetraprism lens assembly for the iPhone 15 Pro Max, combined with higher-than-expected shipments of high-end Android phones. Therefore, it’s expected that 2023 EPS will reach ~150 (vs. market consensus of 130–140).

• Largan is the exclusive supplier of the tetraprism (periscope) camera lens for the iPhone 15 Pro Max. Apple’s urgent spec upgrades led to a production yield of only about 40% in 3Q23, resulting in negative gross margins and dragging down 3Q23 EPS. However, my latest survey indicates that Largan has now improved the yield to 70% or more significantly, making the tetraprism lens assembly profitable and materially accretive to EPS in 4Q23.

• Looking ahead to 2024, the two fastest-growing brands in global periscope camera smartphone shipments are Apple and Huawei.

• Apple is expected to include a tetraprism camera in the iPhone 16 Pro, leading to a 160% YoY growth in iPhones with this camera in 2024.

• Huawei’s flagship P70, P70 Pro and P70 Art, which are expected to start mass shipments in 1H24, will also feature periscope cameras. The P70 series, which benefits from using its own Kirin chips, is expected to see 100% YoY shipment growth in 2024 (compared to the P60 series 2023).

• Largan is the primary supplier of periscope lenses for Apple and Huawei in 2024, with supply shares of 85–90% and 50–60%, respectively. As the yield of Largan’s orders for Apple has significantly improved from 4Q23 and started to contribute to profits, and with a significant 130% increase in total periscope orders for 2024, the profitability in 2024 is expected to exceed market consensus.