Highlights

• Companies with Apple and premium exposure remained relatively more resilient than those with Android mass-market and low-end/mid-range exposure, although earnings outcomes still depended on product mix and execution. Cowell reported in-line revenue but a 37.6% net profit beat versus consensus; Lens’ revenue fell 7.4% yoy but net profit beat consensus by 48.7%; BYDE’s revenue beat consensus by 6.3% but net profit missed by 46.4%.
   
• OEM commentary remains less negative than supplier guidance. Xiaomi expects the pace of memory cost increases to slow in 4Q26, whereas AAC, Sunny and Q Tech continue to flag handset pressure, with Sunny expecting OEM order cuts through 2027. This divergence keeps us cautious about the 2027 Android shipment outlook.
   
• Diversification into AI devices and infrastructure components is providing a meaningful buffer. Sunny and Q Tech’s AIoT products are starting to contribute to a meaningful portion of their top- and bottom lines. Lens, BYDE and AAC are also expecting AI server components contribution to pick up from 2H26.
   
• We prefer Apple suppliers over Android suppliers on stronger relative shipments, more resilient margins and a multi-year specification upgrade cycle. Within this framework, we favour Cowell for its iPhone camera-content and share gains, HL for its current AI-PCB growth and potential Apple capex upside, and Sunny Optical for its premium handset positioning and fast-growing AIoT businesses.
   

Analysis

• Performance of handset supply chain diverged. Within our coverage, Sunny Optical (Sunny), Cowell, and Han’s Laser (HL) registered strong earnings growth while beating market’s expectations; Lens Tech (Lens) and Xiaomi saw meaningful yoy declines in earnings but earnings were better than feared; AAC registered a decent yoy growth but growth was materially below expectations; while Q Tech and BYD Electronic (BYDE) missed expectations with sluggish yoy growth. Overall, we identified that: a) players with exposure to premium smartphone segments are generally better off; b) players with exposure to the iPhone supply chain are also significantly more resilient than pure Android players; c) almost all supply chain players are accelerating its efforts to diversify out of smartphones, and are treating AI infra and AI device related-products as the next growth driver; and d) with the exception of Apple, OEMs remained in a much worse situation than their suppliers as they are most directly hit by the cost hikes.