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A photo of the Apple Watch, unveiled by Apple Inc. on Sept. 9, 2014, in Cupertino, California. Photo: Kyodo

Apple Watch set to lift fortunes of Hong Kong component supplier AAC

Supplier of 'haptic' technology for iPhones to ramp up production before new device's launch

The anticipated release of the Apple Watch next year could prove a boon for Hong Kong-listed AAC Technologies, the leading supplier of miniature acoustic components to the iPhone and iPad.

Analysts expect AAC's non-acoustic business, led by its haptics motor products, to become a new growth driver for the company as these components are used in more smartphones, media tablets and wearable computing devices like smartwatches, following the launch of the Apple Watch around spring.

Haptics refers to the technology used on mobile phones and similar devices that enables a user to feel a tactile sensation, such as vibration, when interacting with an application. Video game controllers have used this technology for years, but its adoption for "wearables" could potentially make haptics part of many everyday applications.

AAC makes a range of miniature, low-power motors that can be integrated with other microelectronic components, such as microphones and speakers, to create better and faster haptic feedback.

Daiwa Capital Markets analyst Kylie Huang said the Apple Watch, which she expects to be released late next quarter, has adopted AAC's haptics products after these were built into the new iPhone 6 and iPhone 6 Plus models.

"We see AAC starting a major ramp-up of its haptics products as new software apps and designs come into the market next year," said Huang, who expects such innovation to raise demand from Chinese brands that have smartphone and wearable products.

She predicted AAC's non-acoustic business, which includes miniature antenna products, to contribute up to 35 per cent of total revenue next year, up from an estimated 20 per cent this year and zero in 2012.

AAC is forecast to post total revenue of 11.85 billion yuan (HK$14.9 billion) next year from about 8.88 billion yuan this year.

Announced in the United States in September, the Apple Watch features a technology it calls the "Taptic Engine" that literally taps a user on the wrist whenever an alert or notification is received. By working together, the engine and the built-in speaker can "enable an entirely new vocabulary of alerts and notifications you can both hear and feel", Apple said.

Last month, Apple released its WatchKit software, which gives developers a set of tools to create apps for the Apple Watch. Instagram, the mobile photo-sharing network, has made an app for Apple Watch users to instantly "like" a photo or react with an emoji ideogram.

GF Securities analyst Joseph Ho said in a report that the Apple Watch launch would be "a share price catalyst" for AAC, which he maintains as a buy at a target price of HK$53.75.

Shares of AAC were down 0.12 per cent to HK$40.25 on Friday. The AAC website showed its current "partners" include major Chinese players like Lenovo, Xiaomi, ZTE, Huawei Technologies, Coolpad, and TCL.

Research firm IHS Technology said the Apple Watch market is tied to the global installed base of iPhones, estimated to be roughly 400 million.

This article appeared in the South China Morning Post print edition as: Apple Watch set to lift fortunes of HK-listed AAC
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