The author is an analyst of NH Investment & Securities. He can be reached at email@example.com. -- Ed.
Global smartphone demand has decreased due to Covid-19. We expect the trend to sustain in February as the virus spreads. Although handset industry shares have recently corrected due to concerns over slowing demand, we see dip-buying opportunities for stocks related to general-purpose parts, foldable smartphones, and Apple phones.
January global smartphone sales decrease due to Covid-19
Global smartphone sales in January totaled 120.05mn units (-5.5% y-y, -9.2% m-m), sliding for a third straight month from November. We believe that the coronavirus outbreak began affecting demand in earnest from the last week of January, and that a similar trend will be seen in February data. Demand normalization is expected to take place in April-May.
Among major players, Chinese companies such as Xiaomi, Oppo, and Vivo achieved relatively sound sales. Apple recorded January sales of 19.28mn units (+4.1% y-y, -18.0% m-m). The firm’s y-y sales increase is attributed to brisk sales of the iPhone 11, while the m-m decrease stems from Covid-19. Demand is expected to fall further due to the Lunar New Year holidays and delayed store openings owing to the coronavirus outbreak.
Samsung Electronics (SEC)’s January smartphone sales stood at 21.81mn units (+1.9% y-y, -11.5% m-m). The decrease is mainly due to slowing sales of low/ mid-priced smartphones in EMs (including India), with sales of the Galaxy A series reaching 15.52mn units (-11.2% m-m). Galaxy Fold sales amounted to 90,000 units (-20.5% m-m).
Load up on stocks related to Apple, general-purpose parts, and foldable smartphones
Due to concerns over slowing smartphone demand, following the spread of Covid-19, overall share prices in the domestic handset industry have been on a decline. We recommend using the share price adjustment as an opportunity to load up on stocks related to general-purpose parts, foldable smartphones, and Apple phones. In particular, we note that recent brisk sales of foldable smartphones have led to increased orders for related parts.
We recommend general-purpose parts stocks (eg, SEMCO, Samwha Capacitor, and Abco Electronics), foldable smartphone-related plays (eg, Sekyung Hitech, KH Vatec, BH Flex, and SKC Kolon PI), and Apple-related shares (eg, LG Innotek, ITM Semiconductor, and Derkwoo Electronics).