Company Reports

AAC Technologies' first-half 2026 revenue and operating margin rose 9% year on year to CNY 14.5 billion and 79 basis points to 6.6%, respectively. Management alluded to several billion yuan in growth potential in data center and artificial intelligence hardware products in 2027.

We assess our China smartphone supplier coverage, Q Technology and AAC Technologies, before they report earnings in August.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to 8.5% in 2025 from 50.8% in 2015.

AAC Technologies' second-half 2025 revenue and net profit were up 15% year on year at CNY 18.5 billion and up 30% at CNY 1.64 billion, respectively. It acquired a small data center cooling company, marking its first step into the hot market.

DRAM and NAND memory prices have doubled over the past three months. Share prices of smartphone component players Q Technology, AAC Technologies, and Sunny Optical have retreated over 25% from their 2025 highs.

AAC Technologies' first-half revenue and net profit were up 18% year on year at CNY 13.3 billion and up 63% at CNY 876 million, respectively. However, the gross margins of all segments, except optics, fell year on year. Shares plunged 13% after the results.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to 6.7% in 2024 from 50.8% in 2015.

On June 16, 2025, Xinhua cited Chinese central and provincial officials as acknowledging regional gaps in funding for subsidizing consumer electronics devices. However, the officials reassured consumers that purchases made before Dec. 31, 2025, can be eligible.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to 6.7% in 2024 from 50.8% in 2015.

AAC Technologies' revenue and net profit for the second half were up 43.6% year on year at CNY 16.1 billion and up 114% at CNY 1.26 billion, respectively. Net profit was in line with the company's profit alert in February. Management targets double-digit sales growth for 2025.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to 6.7% in 2024 from 50.8% in 2015.

Sunny Optical and AAC Technologies expect their 2024 net profits to grow about 140% year on year to CNY 2.7 billion and CNY 1.2 billion at their respective midpoints. Both companies cited recovery in smartphone shipments and higher mix of high-end products as the main drivers.

Shares of Chinese optical component companies Sunny Optical, Q Technology, and AAC Technologies have gained more than 20% since releasing their interim results. We believe this is due to competition between optical firms having eased on the low-end and midrange lens and camera modules, and the market is expecting nationwide subsidies for consumer electronics in China. We view Q-Tech, Sunny, and AAC as fully valued, as we already expect price wars to end amid the resumption of smartphone camera upgrades, and government subsidies are likely nonrecurring. Our fair value estimates for Sunny, Q-Tech, and AAC remain at HKD 60.00, HKD 5.70, and HKD 31.00 per share, respectively.

Consumer electronics component suppliers Sunny Optical, AAC Technologies, and Luxshare Precision have reported first-half earnings beyond our expectations, but management’s comments are mixed for the next few quarters. We leave our fair value estimates for Sunny and Luxshare unchanged at HKD 60 and CNY 40 per share, respectively, and raise our valuation on AAC to HKD 31 from HKD 23. Sunny is our pick among the three as the narrow-moat firm has a track record of applying its intellectual property to different industries (like cars), and we see Sunny as best-positioned to profit from more powerful cameras equipped on midrange and premium phones. AAC and Luxshare are fairly valued, in our view, as smartphone recovery has been priced in, and growth in automotive segments is less visible than for Sunny.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to negative 1% in 2023 from 35.8% in 2013.

AAC Technologies' shares have been benefiting from better smartphone shipments in the past few months, but the tailwind to earnings may not show up as much in the first half of 2024. We retain our HKD 23 fair value estimate for now, pending the release of first-half results on Aug. 22, tentatively. The market seems to have priced in additional demand for better smartphone components, and we see upside to be limited by macroeconomic conditions.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to negative 1% in 2023 from 35.8% in 2013.

We raised our fair value estimate for AAC Technologies to HKD 23 from HKD 17 due to improved upgrade visibility for its speakers and microphone components and access to Premium Sound Solutions’, or PSS', customer base of leading global automakers. However, we believe the market has fully priced in the improved specification upgrade demand, better optics execution, and synergies from the PSS acquisition.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, its return on invested capital declined to negative 1% in 2023 from 35.8% in 2013.

Over the past decade, AAC has benefited from the rise of Apple, which accounts for around half of the firm’s sales, by supplying acoustics and haptics components to the phonemaker and its laptop casing, through the Toyo Precision acquisition. However, AAC has had to endure a slowdown in the adoption of the new speaker and touch feedback technologies by Apple and intensifying competition within Apple’s supply chain. As a result, we estimate its return on invested capital will decline to negative 3.8% in 2023 from 33.1% in 2013.