Component Inventory Burden to Climb in 2H22
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Global smartphone sales remained sluggish in June, affected mainly by slowing sales in Europe, India, Southeast Asia, and Latin America. In our view, tepid sales at Chinese makers (excluding Honor) present a concern. We maintain iPhone and foldable smartphone-related firms as preferred plays.
Global smartphone sales (excluding iPhone) remain sluggish
In June, global smartphone sales came to 96.7mn units (-16.1% y-y, +0.2% m-m), falling below the 100mn units per month level for a second consecutive month on continued sluggishness. Slowing sales in Europe, India, Southeast Asia, and Latin America were the main drags on the global figure. Recovery is expected from September, when new product launches should begin in earnest. Apple’s dominance is likely to sustain.
By region, y-y sales decline was witnessed in all regions, but particularly in Europe and EMs, which were impacted by the ongoing war and the weak euro. Whether demand improves in 2H22 is to be key. In China, a m-m sales rise was driven by effects from the 618 shopping festival, but y-y decrease continued.
Samsung Electronics (SEC) sold 19.4mn units (+4% y-y, -10.4% m-m) in June, maintaining its y-y growth trend. Although sales at Apple fell 9.1% y-y, if excluding the iPhone SE3, its sales of high-end products remained brisk. Excluding Honor, sales at Chinese companies contracted by around 30% y-y.
Component inventory burden to climb in 2H22 due to sluggish sales at Chinese firms
Global smartphone sales remain sluggish if excluding the iPhone. In the short term, however, sales volume is likely to pick up on major new product launch events such as those for foldable smartphones in August and the iPhone 14 series in September.
However, it is worrying that sales at Oppo, Vivo, and Xiaomi remain lackluster, despite market share expansion for Honor in China. In June, shipments by local companies in the Chinese market came in similar y-y, but sales fell 8.9% y-y. Concerns over inventory burden may rise in 2H22.
Continuing to expect strong sales of iPhones and foldable smartphones, we still favor parts makers with a high portion of sales to Apple such as LG Innotek, BH Flex, and PI Advanced Materials, and foldable smartphone-related companies such as KH Vatech, Fine Technics, and Innox Advanced Materials.