During China Mobile Global Partner Conference on 14-16 Nov, China Mobile (CM) announced its 5G device target in 2020: 1) 70mn 5G sub, 2) 100mn 5G smartphones, 3) 50mn smart home devices, and 4) 15mn 5G module. In addition, CM expected 5G phones to cost RMB2k/1.5k in 3Q/4Q20E, largely in-line, while CM’s estimate of 150mn China 5G shipment is well above consensus of 100mn China 5G shipment and 150-200mn global 5G shipment. We believe CM’s commitment is positive to end-device demand (smartphone, smart home, IoT) in 2020, and accelerated 5G upgrade will benefit selective components, such as Sunny Optical, Q-tech, BYDE, Tongda, FIT Hon Teng and Luxshare.
- China Mobile 2020 5G target: 70mn 5G sub, 100mn 5G phones, 50mn smart home devices. CM estimated 150mn 5G smartphone shipment in China in 2020E, well above 100mn for consensus estimates. It also implies significant upside to 150-200mn for consensus global 5G shipment in 2020E. We noted that recent company guidance is increasingly bullish, such as Mediatek’s 140mn+ (100mn in China) and TSMC’s 200mn units. Overall, we maintain our bullish view and estimate China 5G shipment of 153mn/296mn/ 386mn and global 5G shipment of 217mn/547mn/829mn in FY20/21/22E.
- Xiaomi to sell RMB2k 5G phones in 1H20E; Apple/Huawei to ship 55-65mn in 2020. We believe Xiaomi’s pricing strategy will intensify OEM competition by lowering 5G phone price to RMB2k in 1H20E, which will boost China 5G phone adoption in 2020 (24%/35% for our FY19/20E estimate). Overall, given strong branding and advantage of self-developed SoC, we estimate Apple/Huawei will become the two largest 5G brands with 55-65mn each in 2020, while Xiaomi/Oppo/Vivo will ship 15-20mn each in 2020.
- Accelerated 5G cycle to drive selective spec upgrade; Prefer Sunny/ Q-tech/ BYDE/ Tongda/ FIT/ Luxshare. Given BOM cost pressure from more expensive chipsets on 5G phones, we expect only selective components will benefit from spec/ASP upgrade. We maintain our positive view on 5G content growth names, such as Sunny/Q-tech for multi-cam/3D sensing, BYDE/Tongda for casing upgrade, and Luxshare for antenna/ wearables demand. Upcoming catalysts include 5G SoC in 1Q20E, CES in early Jan and MWC in Feb.
