Huawei launched its Mate 40 series (Mate 40/40 Pro/40 Pro+) in an online event on 22 October, with key spec upgrades: 1) 5 nm Kirin 9000 5G SoC chipset, 2) 17x optical zoom periscope quad-cam with 3D ToF (vs tri-cam + ToF on Mate 30 Pro), and 3) 50W wireless fast charging (vs 27W on Mate 30). Huawei also unveiled new wearables/IoT products including Freebuds Studio, Eyewear II and Huawei Sound speaker. Although we expect challenging outlook for Huawei smartphones in FY21E (30-40mn, vs 190mn in FY20E) amid US ban, we believe Mate 40 Pro+’s rear quad-cam will set a new standard for Android flagship models, driving spec upgrade to re-accelerate in 1H21E. Overall, we continue to favor camera supply chain and wearables names, and reiterate Buy on Sunny Optical for camera leadership, Luxshare/Goertek for AirPods/Watch, FIT Hon Teng for Belkin TWS/wireless charger, and BYDE for Apple share gain.
- Huawei Mate 40 set a new bar for cameras; Sunny/Luxvisions are major CCM suppliers. Mate 40 Pro+ features an array of quad-cams offering 17x optical zoom, which includes a 50MP main camera, a 20MP ultrawide-cam, a 8MP periscope-cam (10x zoom) and a 12MP telephoto-cam (3x zoom). It was upgraded from Mate 30 Pro’s tri-cam (40MP/40MP/8MP) with 3x optical zoom last year. We believe Sunny and Luxvisions are rear-cam CCM suppliers, and Sunny, O-film and Q-tech are front-cam CCM suppliers. We expect optical zoom and periscope design to remain major focus for flagship models in FY21E, benefiting Sunny Optical and Q-tech as CCM leaders.
- Freebuds Studio and Eyewear II ahead of Apple launch. Huawei also unveiled several wearables/IoT products, including Freebuds Studio, Eyewear II and Huawei Sound, ahead of Apple’s launch next year. Given ongoing US ban, we expect Huawei will continue to step up expansion into non-smartphone categories, such as PC, IoT and software platforms (OS, HMS). We believe major Freebuds suppliers are Luxshare and Goertek.
- Expect component restocking to persist into 4Q20-1Q21E. Our recent checks suggested that restocking demand for smartphone components remains strong in 4Q20E despite recent sell-through weakness due to product launch delays. We believe Android brands’ aggressive restocking aim to capture opportunities from Huawei share and upcoming 11.11 festival.
- Prefer Sunny Optical, Luxshare, Goertek, FIT Hon Teng and BYDE for camera/wireless/wearables trend. Since most components will be under ASP pressure in 2H20E due to higher 5G-semi BOM cost, we like spec upgrade themes and wireless/wearables plays, such as Sunny Optical for camera upgrade, Luxshare/Goertek for TWS/AirPods/Watch, FIT Hon Teng for Belkin TWS/wireless charger, and BYDE for Apple share gain and iPad/ Watch components.
