China Securities Co., Ltd.: Apple Inc. (AAPL.US) has opened a new cycle of innovation, and the demand for 3C devices is expected to enter an upward cycle.

China Securities Co., Ltd. securities research report states that by 2024, with the shipment of Vision Pro and the release of AI systems, Apple Inc. (AAPL.US) will usher in the "year of innovation" as mentioned by CEO Cook. For 3C devices, due to the focus on software iteration for innovation in 2024 at Apple Inc., the demand driven by hardware iteration is limited, resulting in relatively stable demand for 3C devices. However, the new AI system and MR new series released lay a good foundation for the next round of innovation cycles. Looking ahead to 2025 and beyond, with the accelerated iteration on hardware modules and continuous advancement in automation of production lines, the demand for 3C devices in 2025 is promising, and the subsequent new products and hardware iterations are expected to continue, leading to a potential upward cycle in demand for 3C devices. Key points from China Securities Co., Ltd. include: Supply and demand analysis framework of the 3C device industry From the demand side, as Apple Inc. dominates the demand for 3C devices, attention should first be paid to the changes in Apple Inc.'s terminal products and terminal product sales volume. Secondly, the focus should be on the new product iterations of other consumer electronic brands and progress in production line upgrades. From the supply side, domestic 3C devices hold a dominant position in the industry, with weaker competitiveness and lower market share of similar overseas companies. Although Apple Inc. plans to transfer some of its production capacity from mainland China to India, Vietnam, and other places, the equipment demand brought by new production capacity is expected to be met by domestic 3C device companies. In 2024, Apple Inc. welcomes the "year of innovation," with a focus on software iteration, and limited device iteration driven by hardware In 2024, Apple Inc. released many innovative products, and CEO Tim Cook referred to it as the "year of innovation" for Apple Inc. In terms of new products, in February 2024, Apple Vision Pro began shipping, despite criticisms in terms of price, comfort, battery life, and application ecosystem, being the first revolutionary virtual reality product from Apple Inc. On the software side, in June 2024, Apple Inc. released the Apple Intelligence system, which includes a series of artificial intelligence technologies developed by Apple Inc., aimed at continuously enhancing the intelligence level of its devices, and redefining the fusion of privacy protection and artificial intelligence through private cloud computing. On the hardware side, the iPhone16 series had varying degrees of iteration in the processor, screen, battery, camera, and side camera control button, but the overall magnitude was small. Overall, the demand for 3C devices in 2024 was relatively stable, but the new AI system and the MR new series released laid a good foundation for the subsequent new cycle of innovation. In 2025, the AI system is expected to deepen its application, Apple Inc. hardware innovation is expected to kick off, and the demand for 3C devices may enter an upward cycle Looking ahead to 2025, although the specific design of the iPhone17 has not been finalized and announced, based on current media reports and industry chain information, with the AI system already in the iPhone16, the iPhone17 is expected to further enhance the application of the AI system and combine more hardware upgrades to improve the user experience of the AI system, including modules such as processors, memory, battery, heat dissipation, and cameras. Additionally, in 2025, Apple Inc. is expected to further promote the automation transformation of production lines (assembly and inspection equipment both advancing towards "machines replacing humans"), and introduce a thinner version of the iPhone17 new size model. Looking ahead to 2026 and beyond, Apple Inc. is expected to continue to focus on wearable products, including watches, headphones, or accessories with infrared cameras and other sensors, while VR headsets and other new products are expected to continue to be developed and introduced to the market. Overall, with the accelerated iteration of hardware modules and the continuous advancement of automation in production lines, the demand for 3C devices in 2025 is promising, and the subsequent new products and hardware iterations are expected to continue, leading us to believe that the demand for 3C devices may enter an upward cycle starting in 2025. Investment recommendations In 2024, with the shipment of Vision Pro and the release of AI systems, Apple Inc. enters the "year of innovation" as mentioned by CEO Cook. For 3C devices, due to the innovation focus on software iteration in 2024 at Apple Inc., the device demand driven by hardware iteration is limited, resulting in relatively stable demand for 3C devices. However, the new release of the AI system and MR new series lay a good foundation for the subsequent new cycle of innovation. Looking ahead to 2025 and beyond, with the accelerated iteration on hardware modules and continuous advancement in automation of production lines, the demand for 3C devices in 2025 is promising, and the subsequent new products and hardware iterations are expected to continue, possibly leading to an upward cycle in demand for 3C devices.