Taipei: Apple Inc. turned in a strong quarter with revenue, profit and forecasts all coming in ahead of analysts’ estimates. But that isn’t necessarily good for the hundreds of iPhone suppliers around the world, contrary to the market’s knee-jerk reaction.

Apple’s better-than-expected results stemmed in part from the sale of ancillary goodies from games to cloud storage. None of those benefit hardware partners such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Hon Hai Precision Industry Co., whose fortunes are more closely tied to iPhone unit sales—which rose just 2.9% in the March quarter despite a 10th-anniversary iPhone X that was supposed to drive a super-cycle of demand.

A slight slowdown in iPhone sales can mean a huge hit to those suppliers. It’s the price of participating in Apple’s supply chain: companies build expensive factories in advance of product cycles so even modest misses hammer profits. Taiwan’s Pegatron Corp., which assembles the iPhone 8, ramped up capacity in anticipation of a surge in demand last year, but the shortfall led to lower utilization rates in its factories and operating margins slid from 2.8% in 2016 to 1.61% last year.

“Apple is benefiting from increased average selling price. Yet volume, which is key to suppliers’ financials, is only growing a little," said Arthur Liao, an analyst at Taipei-based Fubon Securities.

Shares in suppliers to the world’s most valuable company diverged Wednesday: some clawed back losses incurred over past weeks while others deepened their slide. In Hong Kong, AAC Technologies Holdings Inc. leapt as much as 6.7%, while Japanese components makers such as Japan Display Inc. and Sharp Corp. climbed a tad. But TSMC—the main chip supplier to Apple— slid as much as 1.1%. Hon Hai, Apple’s most important device assembler, was largely unchanged.

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Apple chief executive officer (CEO) Tim Cook hinted at additional sources of growth in terms of both geographical areas and product categories. He said India is an attractive new market for iPhones, similar to China several years ago.

Cook may be addressing skepticism about its prospects in emerging markets, with China dominated by competitors from Huawei to Xiaomi and its iPhones beyond the reach of many in India. Globally, concern about the business was fanned by suppliers such as TSMC that warned of weak demand for high-end devices or delivered disappointing outlooks: all signs that the smartphone boom that made Apple the most-valuable company is ebbing. That prompted a flurry of estimate cuts from analysts around the world.

Even if Apple does make headway in India or China—still its largest international market—there’s no guarantee its hardware partners can share in the spoils, given the US company’s reputation for squeezing suppliers to preserve its own margins. It’s even in recent years begun cutting off suppliers such as Imagination Technologies Group Plc in favour of making its own components, such as chips. Bloomberg