Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Apple shareholders didn't react well to news of the iPhone maker's first sales decline in 13 years.

The reaction of its two biggest manufacturers? Meh.

While Apple stock dropped more than 8 percent in the after-market session, Hon Hai and Pegatron, which between them assemble more than half of Apple's iPhones and iPads, barely winced. Hon Hai, the Taipei-traded unit of Foxconn Technology Group, fell just 0.9 percent -- in line with the broader MSCI Asia-Pacific index. Pegatron investors actually cheered, driving the stock up 0.4 percent as Taiwan's benchmark index dropped.

This immunity to Apple's woes seems counterintuitive: Hon Hai gets more than 50 percent of its sales from that one Cupertino client, yet traders have turned progressively bullish on the stock in the past three months. Pegatron is similarly reliant.

While Hon Hai is up a modest 9 percent from its Jan. 21 low, more telling is that fewer traders see any downside, driving short interest to almost the lowest point since November. A similar tale plays out for Pegatron.

Forbidden Fruit
Short interest in Apple's suppliers reached a crescendo in February. Investors now appear far less concerned
Source: Bloomberg

There's a reason for this disconnect.

It would be easy to say that Apple is no longer so important to Hon Hai, so that the Taiwan stock rises and falls on non-iPhone factors. But despite Chairman Terry Gou's best efforts, the company remains dependent on the annual offerings from Jony Ive's cave, and the two stocks have been closely linked even in the past six months. Hon Hai will need a few years yet to decouple its revenue from Apple's.

In Sync
Hon Hai and Apple shares have tracked one another over the past six months
Source: Bloomberg

The short-interest chart hints at what's really going on. Bearishness on stocks of both suppliers peaked in January and February, with the 159 million shorted shares of Hon Hai on Feb. 16 being the highest in at least five years.

That's because the supply chain, represented most clearly by Hon Hai and Pegatron, already knew back in January what Apple investors were formally being told this week: All is not well in the iPhone Kingdom. And in Taiwan, where journalists, analysts and traders ensure that secrets don't stay secret, investors started pricing in those concerns.

This doesn't look like a coincidence when you consider that a spike in Hon Hai short interest in early 2012 preceded Apple reporting its weakest growth since 2009 and the biggest sales miss in six years.

Importantly for investors, the correlation appears to work both ways. Hon Hai short interest fell to a four-year low in September 2014, months before Apple closed out its strongest revenue growth in three years. A similar trough in short selling in August 2010 presaged three consecutive quarters of revenue growth that exceeded 70 percent.

A wise investor would avoid making decisions based only on such correlations. But it's worth at least asking why the companies that rely the most on Apple seem nonplussed by the bad news out of Cupertino.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Paul Sillitoe at