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Is Recent News Bullish for Apple Investors?

By Mark Morelli – Jul 4, 2014 at 6:45AM

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Chinese contract manufacturer Foxconn is reportedly hiring 100,000 additional employees to assemble the iPhone 6.

A recent report claims that contract manufacturer Foxconn will be hiring an additional 100,000 employees in China, a record number there according to one estimate, to help assemble an updated version of the iconic iPhone, due out in time for the busy holiday shopping season.

If true, the story by the Taiwanese Economic Daily, combined with other supply chain information, indicates that there will be strong demand for the device, which bodes well for Apple (AAPL 1.56%) investors. One research company calls the new iPhone a "white hot" opportunity.

The news might be a bit disquieting for shareholders of other smartphone makers such as Samsung (NASDAQOTH: SSNLF) and (AMZN 1.26%).

Two sizes fit all
Another rumor suggests that Apple will release two models of the new version, increasing screen sizes to 4.7" and 5.5" to address a growing user preference in the market.

It is not clear which of the phones that Foxconn would produce, as Apple also uses Pegatron to assemble some of its mobile devices. However, Pegatron is reportedly ramping up hiring to handle new iPhone production.

Samsung already offers several phones with a large display, so Apple had a bit of catching up to do on that front. However, iPhones with smaller screens have outsold bigger Galaxy devices so far, and allowed Apple to dominate in both high-end market share and overall industry profits. Apple currently derives more than 50% of its revenue from the iPhone. The new models will most likely continue that success, assuming the trends hold up.

All fired up
Amazon just announced its first foray into phones. The "3D-like" Fire phone is slated to ship this summer. Whether the device can successfully compete against the iPhone, or even the Galaxy lineup, remains to be seen. Amazon is probably selling the device only to direct more traffic to its web site and help grow its top line, which has been increasing at double-digit rates for a long time. It will offer its Amazon Prime service free for one year as an enticement.

If its previous experience in mobile is any guide, Amazon might have a tough time gaining any traction from the new device. The company's Kindle devices have been losing share, and shipments have been declining. But, Apple has been leading, and Samsung has started to grow its presence in tablets. Things probably won't be any different in the crowded smartphone market either, as the Fire phone isn't really anything special (except, maybe, for the Firefly object recognition feature), and the company is getting a very late jump on things.

Fanboys of Apple and Samsung aren't likely to switch to Amazon, so it's really just a two-horse race. 

Foolish conclusion
A report that longtime Apple supplier Foxconn is increasing its workforce ahead of the launch of the next iPhone is very bullish for investors of the Cupertino-based company, which should continue its very successful run in the smartphone industry.

Investors of Samsung may have to be content with the company being just the runner-up in high-end smartphones. Shareholders of the new kid on the block, Amazon, might not see much contribution to returns from the Fire phone.

Mark Morelli owns shares of Apple. The Motley Fool recommends and Apple. The Motley Fool owns shares of and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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