Weak IT Product Sales on COVID-19

The authors are analysts of Shinhan Investment Corp. They can be reached at hyungwou@shinhan.com and ym.ko@shinhan.com, respectively. -- Ed.

 

Weak IT product sales on COVID-19 and concerns over inventory levels at clients

The impact of the COVID-19 pandemic on sales of IT products has been confirmed. Global smartphone shipments are expected to decline 21% YoY in 1H20. Demand for IT parts has remained solid despite lackluster smartphone sales. Inventory levels differ by supplier and component, but we see a gap between smartphone sales volume and parts demand. A steady and decent level of parts supply seems to indicate that IT product manufacturers are stocking up on components.

Samsung supply chain: Inventory adjustment completed in 2Q

As a preemptive move, Samsung Electronics aggressively cut orders for smartphone parts in April and May. It is therefore relatively free of inventory burden vs. Apple or Chinese smartphone makers.

Mobile demand recovery in 2H20: Focus on stocks rebounding in 3Q

Smartphone shipments are forecast to rebound in 2H20. Stocks that have already factored in negatives will likely enjoy a steep rise during the recovery in demand for mobile devices. First, we focus on parts vendors of Samsung Electronics that have already completed inventory adjustment. Parts suppliers in the Samsung value chain should see their capacity utilization rates recover in June and normalize in July. Second, large-cap semiconductor stocks (Samsung Electronics, SK Hynix) appear more attractive than large-cap handset/electronics stocks. Third, we favor Samsung Electro-Mechanics among large-cap handset/electronics stocks.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution