The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
In general, global IT companies expect improved earnings from 2H24 and a recovery of the Chinese market. China’s IT industry rebound is judged to be the most important point of 2024.
IT industry conditions to gradually improve; some companies detecting recovery in China
Recently, global players are predicting that IT industry conditions will improve from 1H24, with full-scale recovery likely to begin from 2H24. Although earnings at Japanese firms have also been weaker than expected due to the slowdown in downstream industry demand and inventory adjustments, they too anticipate a gradual recovery in 2024. Of note, China’s recent IT industry rebound is being tangibly felt by some companies.
No disagreement about China’s recovery
We note that although expectations for the timing of an IT industry rebound differ slightly by company depending on the downstream industry and related conditions, there is little disagreement about the recovery of the Chinese market. Therefore, firms with a high portion of sales toward China should see earnings rebound relatively quicker.
Companies related to China’s IT sector with strong visibility to benefit
Regarding domestic companies, SEMCO and JNTC, which have high sales portions related to Chinese smartphones, are particularly well-positioned, given China’s stronger and more rapid smartphone sales recovery relative to expectations.