Apple's Next-Gen AirPods Bring New Opportunities to the Industry Chain

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Earlier this month, Bloomberg's Mark Gurman revealed Apple's plan to incorporate more health tracking features into its audio products.

According to Mark Gurman's newsletter, Apple is working on a new hearing test feature that will play different tones and sounds to allow the AirPods to determine how well users can hear and help them screen for hearing issues.

In addition, Mark Gurman revealed that Apple plans to add more health sensors to the AirPods hardware, such as measuring body temperature through the ear canal. This feature would allow AirPods to collect more accurate data than the Apple Watch Series 8 and Ultra models, which collect data through the wrist while users sleep, and expand the use to determine whether the wearer is experiencing cold or other illnesses.

Two years ago, Apple applied for a patent allowing temperature sensors to be integrated into handheld or wearable devices. Apple explicitly mentioned the applicability of this patent to earphones and other portable electronic devices. It is well known that Apple sets the trend for consumer electronics, and each iteration of its products tends to spark a wave of consumer enthusiasm. Based on Apple's historical release patterns for the AirPods series, the next generation of AirPods is expected to be launched in the fall of this year. Although the mentioned features still need to be determined to realize in the next AirPods, the relevant Apple suppliers are already taking action for it.

Currently, China's TWS earphone industry has developed a relatively mature supply chain structure with upstream component manufacturers, midstream ODM manufacturers and downstream brand manufacturers, many of which are public-listed companies. On the smartphone manufacturer side, Android-based TWS products are experiencing shorter update cycles, with approximately 2-3 months between the release of new models.

At present, manufacturers in China, such as Honor and Vivo, have already launched wireless earphone products with temperature measurement capabilities. This indirectly confirms the industry supply chain's achievements in China and shows the potential to support the realization of features like temperature monitoring in Apple's next AirPods.

According to Chinese media, Luxshare Precision, one of the leading companies in the consumer electronics industry in China, disclosed in its 2022 annual report that the project of "R&D of TWS headset body temperature monitoring and heart rate monitoring functions" is completed.

According to the public document, Luxshare Precision currently presents in three major areas: consumer electronics, automotive electronics, and communication electronics. Luxshare Precision obtained the core component supply and assembly qualification for Apple's AirPods in 2017. Until now, it still holds the highest share of production orders for Apple's AirPods.

Luxshare Precision is not the only dominant player in the market. It is saying that the leading earphone automation production technology in China is only mastered by Luxshare Precision and Goertek, and it may take about 5 years for other earphone suppliers in China to catch up. In addition, Foxconn is another competitor for AirPods orders.

However, Apple has set extremely high standards for its supply chain. In November 2022, Goertek issued a risk warning, stating that the company had received a notification from a major overseas customer to suspend production of one of its intelligent acoustic products. It is assumed that the lost order is from Apple's AirPods Pro.

After Apple removed the 3.5mm earphone jack from the iPhone 7 in 2017, the TWS earphone market experienced rapid growth. In 2021, global shipments of TWS earphones reached 300 million units. In 2022, the number of total shipments was 288 million units.

In 2022, Apple's TWS earphone shipments reached 91 million units, capturing a global market share of 31.8%. Despite the flourishing wireless earphone market with numerous players, Apple, as the pioneer, still holds significant influence in terms of market share.

From the perspective of development trends, Apple's every new function upgrade will stimulate market consumption, and companies involved in the supply chain, such as Luxshare Precision, Goertek, and Foxconn, are also likely to benefit from Apple's success.