The authors are analysts of NH Investment & Securities. They can be reached at email@example.com, firstname.lastname@example.org and email@example.com, respectively. – Ed.
With second-largest smartphone maker Huawei hit hard by US sanctions, the smartphone market will likely be dominated again by two giants SEC and Apple in 2021, benefiting from both from Covid-19-induced low-base effects (y-y) and greater launches of 5G models. We also expect the foldable and 5G smartphone markets to start expanding in earnest from next year. Against this backdrop, we advise investing in players who stand to benefit from this anticipated new paradigm.
Global smartphone demand is projected to recover gradually from 2H20, after dropping sharply in the wake of the Covid-19 pandemic in 1H20. Assuming that Covid-19 will not spread any further next year, smartphone sales are predicted to set a post-2015 record in 2021, backed by pent-up demand. Moreover, the majority of smartphone makers are set to enjoy sound sales. As it is uncertain if Huawei will be able to keep production amid growing US sanctions, SEC and Apple, who are now the first- and third-largest smartphone makers, respectively, should benefit most from the expected bullish market.
We expect the foldable and 5G smartphone markets to bloom in earnest next year. In the foldable smartphone market, with SEC maintaining its leading position, Chinese companies should roll out diverse models. In the 5G smartphone market, SEC and Apple, as well as Chinese companies, are forecast to increase shipments at a rapid clip.
Under the circumstances, we expect earnings to grow fast at parts companies with high exposure to SEC and Apple, and 5G and foldable smartphone component makers.
SEC-related plays: SEMCO, MCNEX, Partron, and NAMUGA
Apple-related plays: LG Innotek and BH Flex
Foldable smartphone-related plays: KH Vatec, BH Flex, Innox AMC, and DKT
5G smartphone-related plays: SEMCO, BH Flex, and DKT