Smartphone Demand Primed to Rise
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
During recent non-face-to-face marketing meetings with Asia-based investors, many of the participants agreed with us that smartphone demand is set to pick up from 2H20, sharing our upbeat outlook towards the handset/IT parts industry. In particular, the investors focused upon foldable and Apple smartphone parts suppliers.
Investors agree that smartphone demand is primed to rise
We recently conducted non-face-to-face marketing meetings to discuss the handset/ IT parts sector with Asia-based investors. Many of the participants agreed with us that smartphone demand is set to pick up from 2H20, sharing our upbeat outlook towards the handset/IT parts industry.
Several of the investors noted the attractive mid/long-term growth potential of foldable smartphones and 5G smartphones. They expressed particular interest in the manufacturers of parts for foldable smartphones and Apple smartphones. Amongst players connected to foldable smartphone value chains, we like KH Vatec, Segyung Hi-tech, and Fine Technix. Looking at Apple-related parts makers, LG Innotek, ITM Semiconductor, and BH Flex stand out.
Spotlight on foldable smartphones and Apple smartphones-related value chains
Attracting investor interest is our recent prediction that earnings at Samsung Electronics (SEC) should benefit in 2H20 from: 1) a weakening in Huawei’s product competitiveness due the US sanctions; and 2) a boycott of Chinese products in India. Of note, SEC has been aggressively expanding its market share by cutting product prices. The majority of our marketing meeting participants agreed with us that a smartphone demand recovery is approaching.
Given this backdrop, we advised the participants to concentrate upon SEC smartphones-related parts makers, noting that the Galaxy Note 20 and Galaxy Fold 2 are both scheduled to be unveiled during the upcoming (Aug 5) Galaxy Unpack Event. Most of the investors agreed with our assessment that related beneficiaries of the move towards foldable smartphones will include KH Vatec, Segyung Hi-tech, Fine Technix, BH Flex, and Innox AMC.
We commented that Apple’s iPhone 12 series sales are likely to prove better than expected. While some investors expressed some suspicions towards LG Innotek (LGI)’s earnings growth potential after 2021, these concerns were allayed through learning that LGI’s growth should be charged to expand further by: 1) an ongoing widening in the market penetration rate for the firm’s ToF modules; 2) expectations that it will withdraw from the LED arena; and 3) technological upgrading for camera modules, including the adding of optical zoom features. And, the investors shared our belief that the 2H20 outlook is bright for related plays such as ITM Semiconductor and BH Flex.