Tech & EV Corporate Day key takeaways
? Key takeaway from CGS-CIMB Tech & EV Conference: strong China
smartphone industry recovery in 2H22F, despite weak 1H22F sales.
? Automotive applications will be the key growth driver in FY22F, on relative
weak smartphone outlook in 1H22, no thanks to Omicron outbreak in China.
? Maintain Overweight on China smartphone sector on better 2H22F outlook.
Tech & EV Corporate Day takeaway on smartphone space
We hosted CGS-CIMB Tech & EV Virtual Conference 2022 on 7-8 Apr. We had 26
companies, including Will Semiconductor (Will Semi, 603501 CH, Add), Xiaomi (1810 HK,
Add) and ASMPT (522 HK, Add), joining the event. We had over 280 investors across the
region participating in over 600 meetings during the event.
Handset market to remain weak in 1H22F but to strengthen in 2H22F
Handset shipments remained weak in 1Q22 due to: 1) persistent chip shortages, 2)
Omicron outbreak in China, and 3) lack of new model launches. Will Semi expects its
handset smartphone shipments to improve in 3Q22F as domestic supply chain improves
and China smartphone sales recover. Will Semi expects handset spec-upgrades to
accelerate in 2H22F on sustainable megapixel migration in the mid-to-high-end 5G phone
segment and declining component costs, while Xiaomi expects solid smartphone shipment
growth of 10%+ in 2022F, led by the premium segment, Southeast Asia, and the EU and
LATAM markets, and easing of chip shortages. Overall, the smartphone industry should
see strong recovery in 2H22F, on the back of easing chip shortages and new wave of new
models launches.
Automotive segment to become key growth driver in FY22F
Will Semi and ASMPT expect strong demand from automotive applications in 2022-23F
due to fast-growing advanced driver-assistance system (ADAS) development and rising
shipment among Chinese EV makers. Will Semi expects handset CIS volume shipment to
remain flattish in FY22F on slow spec-upgrades but automotive CIS to see strong shipment
growth (over 30% yoy), underpinned by sustainable market share gain in the supply chain
for global tier-1 automakers. ASMPT believes that automotive electrification will be its multiyear growth driver, given that the company is able to provide comprehensive solutions,
including surface mount technology (SMT), advanced packaging (AP), CIS, advanced
display and power module solutions. Xiaomi said the company has spent over Rmb10bn
in the past 18 months building up its R&D team with over 1,000 engineers and investing in
over 60 EV-related companies in China. Xiaomi said that it will be very disciplined with its
EV spending (below Rmb4.5bn p.a.) and expects to launch its first smart EV in 2024F.
Reiterate Overweight on China smartphone sector
We maintain Overweight on the China smartphone sector as we believe Chinese handset
brands’ shipment growth in 2022F and 2023F remains intact (Fig 1), despite poor China
smartphone sales in 1H22F. We also expect handset spec-upgrades to accelerate in
2H22F and onwards, underpinned by improving supply chain constraints and declining
component costs. Our sector top picks are Will Semi, Xiaomi and Sunny Optical (2382 HK,
Add). We Add Xiaomi to our conviction buy list due to its stable smartphone shipment
outlook and enhanced profitability in its Internet services business. We remove Sunny
Optical from conviction buy due to the short-term headwinds in smartphones, although we
are very positive on its market position in the vehicle camera industry