Smartphone Sales Likely to Be Worse in April
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Global smartphone sales in March saw accelerating m-m decline due to the impact of Covid-19. In April, the downtrend is likely to expand further due to lockdowns in major countries. By region, China’s sales recovery is expected to be the fastest, and related domestic companies are anticipated to benefit.
Smartphone sales poor in March, likely worse in April
Global smartphone sales in March came to 89.46mn units (-22.4% y-y, -4.3% m-m), expanding on the m-m decline seen in February. By region, while the overall m-m deterioration has widened, China saw its m-m decrease narrow (-33.6% in February vs -14.9% in March). Considering that lockdowns in most regions (except China) began in mid-March, April smartphone sales will likely show larger m-m decline.
While Samsung Electronics (SEC) and Apple, two players with high exposure to the US and European markets, saw significant smartphone sales decline, Huawei enjoyed sales growth (+26.6% m-m). In March, SEC recorded smartphone sales of 18.62mn units (-27.4% y-y, -9.1% m-m). Due to lockdowns in its major markets (the US, India, and Europe), the firm’s smartphone sales drop is likely to worsen in April. By model, sales of the Galaxy S20 series fell about 35% y-y (compared to sales of last year’s models (Galaxy S10 series)) to 3.14mn units (S20 1.1mn units, S20 Plus 1.55mn units, S20 Ultra 490,000 units). However, the Galaxy Z-Flip achieved healthy sales of 230,000 units (+56.1% m-m).
In March, Apple smartphone sales totaled 10.14mn units (-23.4% y-y, -24.7% m-m). Despite a sales recovery in China, slowing sales in the US and Europe (its major markets) drove the drop in sales. Sales are expected to remain sluggish in April. However, considering the effects of iPhone 11 series price cuts in China since early April and sales of the iPhone SE (a new mid-tier model), the chances of a further sharp decline in smartphone sales looks limited.
Focus on beneficiaries of recovering Chinese smartphone shipments
Considering: 1) the recovery in Chinese smartphone shipments in March (+231.6% m-m); 2) the positive 2Q20 guidance from MediaTek, a Taiwanese wireless communications chipset company; and 3) the aggressive 5G smartphone shipment targets of Chinese players (2020E 150~200mn units), we expect smartphone shipments to recover quickest in China. Given this expectation, we advise paying attention to LG Innotek (LGI), SEMCO, SKC Kolon PI, JNTC, ITM Semiconductor, and Derkwoo Electronics.