Shipment Slowdown a Supply Issue Rather Than a Demand Issue
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
In April, smartphone shipments in China fell short of forecasts. Considering the recent solid demand, we attribute the sluggish shipments to supply issues (including a chip shortage) rather than demand issues. Shipments and sales are expected to improve as supply shortages ease in 2H21.
China’s smartphone shipments weak in April
China’s smartphone shipments fell sharply y-y and m-m in April. Also, in India, production slowed due to the spread of Covid-19. However, we believe that the slowdown in shipments at Chinese vendors is due to a supply shortage and the re-proliferation of Covid-19 rather than a demand decline, issues that should be resolved by 2H21. We recommend using the current lull as an opportunity to buy if share prices fall.
China booked April smartphone shipments of 27.0mn units (-33.8% y-y, -23.4% m-m). Of note, it is difficult to make a y-y comparison owing to the production disruptions caused by Covid-19 in 2020; however, the large m-m decline seems to be a realization of the effects of semiconductor supply shortages.
Recently, Samsung Electronics has also seen a slowdown in shipments owing to semiconductor shortages over April~May. And, on May 11, Trendforce and the Chinese media reported that production volume at smartphone makers and parts orders from Chinese vendors in India will likely fall over 2Q21~3Q21 due to the spread of Covid-19 in India.
Shipment slowdown a supply issue rather than a demand issue
We believe that the recent slowdown in shipments stems from supply issues (such as chip shortages) rather than demand issues. Therefore, shipments are likely to recover again once semiconductor supply/demand stabilizes in 2H21.
In fact, Chinese players such as Xiaomi and Oppo claim that smartphones are also facing supply shortages and that they are considering price hikes in 2H21.
Qualcomm, a bellwether for the smartphone market, also recently mentioned the possibility of raising its smartphone sales guidance for 2021. Therefore, in the short term, if share prices decline, we recommend using it as an opportunity to buy at lower prices in consideration of the likely improvement in conditions in 2H21.