SEC to Roll out Smartphones in Diverse Form Factors
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
1. Global smartphone shipments to bounce back from 3Q21
Global smartphone shipments to rebound in 2H21, coming in at 1.42bn units in 2021
In 2021, global smartphone shipments will likely fall short of expectations, coming in at around 1.42bn units (+6.6% y-y), owing to semicon supply shortages and the resurgence of Covid-19. But, after bottoming out in 2Q21, global smartphone shipments are expected to rebound from 3Q21, backed by an easing of both semicon supply shortages and the Covid-19 crisis, as well as the entry of peak seasonality.
We expect global smartphone shipments to bottom out in 2Q21 and grow q-q through 4Q21. For 2Q21, the figure is sized at 280mn units (-21.1% q-q), considering semicon supply shortages and the resurgence of Covid-19 in countries such as India and Vietnam.
In 3Q21, however, global smartphone shipments are predicted to soar 35.1% q-q to 378.2mn units, driven up by an easing of both semicon supply shortages and Covid-19 effects. In 4Q21, global smartphone shipments are projected to inch up 2.9% q-q to 461mn units in light of Apple’s planned launch of the iPhone 13 series and the entry of a global shopping season.
2. Efforts to boost smartphone demand – Changes in form factor
Global smartphone shipments are expected to grow in earnest from 2H21, and should continue to expand through 2022, driven by normalization of the business environment. However, smartphone shipments are likely to grow at just a low single-digit pace over the mid/long term, given that no obvious factor to drive replacement demand is in sight, with global smartphone penetration having already surpassed 80% and remarkable changes for hardware and software appearing unlikely.
Need for new strategies: 1) Production of smartphones with new form factors 2) Development of new gadgets
Against this backdrop, handset makers are predicted to deploy two main strategies in order to drive replacement demand: They are expected to roll out smartphone models with new form factors (including foldable smartphones) and to release new gadgets such VR and AR devices.
Foldable smartphone market to show continued growth
Following in the footsteps of SEC, some Chinese companies have already begun launching smartphones featuring new form factors. In 2022, nearly all handset makers, excluding Apple, are forecast to roll out foldable smartphones, and the foldable smartphone market should see rapid growth further down the road.
Witnessing sales slowdown for its existing flagship models such as the Galaxy S and Note series, SEC is shifting its focus to high-end foldable offerings. In 2H21, the company is forecast to roll out foldable smartphone models rather than develop the Galaxy Note series.
SEC is a leading player in the global foldable smartphone market. The firm is expected to launch two new foldable models (Galaxy Z Fold 3, Galaxy Z Flip 3) around August.
Galaxy Z Fold 3: Stylus pen, water/dust proofing, UDC technology
The Galaxy Z Fold 3 is expected to adopt the same folding structure as the Galaxy Z Fold 2 and feature a similar-sized display. However, the new Galaxy Z Fold model should be equipped with a stylus pen and also boast new water/dust proofing technology. In addition, the new Fold phone should be the first smartphone model of SEC to adopt under-display camera (UDC) technology.
Galaxy Z Flip 3: Price set 20~30% lower vs previous offering
As a follow-up version of the Galaxy Z Flip 2 released in 2020, the Galaxy Z Flip 3 is predicted to feature a slightly bigger display compared to the previous model. Nevertheless, the new flip phone should also be much more affordable, coming in with a price tag that is lower by 20~30% versus the Galaxy Z Flip 2’s US$1,380.
We forecast that SEC will ship out about 7~8mn units of foldable smartphones in 2021, backed by: 1) the Galaxy Z Fold 3’s H/W specification upgrade; 2) price reduction for the Galaxy Z Flip 3; and 3) the absence of the Galaxy Note series. The firm’s foldable phone sales are forecast to rise to 14mn in 2022.
SEC to roll out smartphones in diverse form factors
Moving ahead, SEC’s foldable smartphone lineup is to expand to include the Galaxy ZSlide and Galaxy Z Roll. Overall, we expect shipments of smartphones in new form factors to gradually expand going forward. Among related parts suppliers, the anticipated expansion of SEC’s foldable smartphone shipment should most benefit KH Vatec, an exclusive hinge supplier, and Fine Technix, a supplier of dissipating metal plate. In addition, Innox AMC (supplier of dissipating digitizer film) and BH Flex (producer of display FPCB) should also benefit.