We forecast global smartphone shipment to rebound 7% YoY to 1.37bn in FY21E (vs -6.5% in FY20E), thanks to China market recovery (+16% YoY), iPhone 12 cycle and availability of mid/low-end 5G phones. While we believe new honor is now waiting for US license approval for component shipment after recent spin-off, we estimate 80mn units in FY21E considering recent component shortage and 1-2 quarter business transition. We expect Xiaomi/Apple will become major beneficiary on share gain from Huawei in 1H21E backed by 5G product pipeline and extensive omni-channel sales network. While de-spec trend will persist into 1Q21E, we prefer market share gainers and Xiaomi/Apple names, such as Sunny Optical for iPad lens order win, Luxshare/Goertek for TWS/AirPods/Watch, and BYDE for share gain in iPad OEM and Watch components.
- Global smartphone to rebound 7% YoY in 2021; Strong 1H21 driven by sub-RMB1k 5G segment. On the back of post-COVID-19 demand recovery, we expect global smartphone shipment to rebound 7%/2% YoY to 1.37bn/ 1.40bn in FY21/22E, while China smartphone will grow 16%/5% YoY to 341mn/ 358mn, mainly driven by strong demand of sub-RMB1k 5G phones.
- Xiaomi/Apple as clear market share gainer in 1H21E. Our check suggested new Honor (post spin-off) is still waiting for US license approval for most components overseas, and we believe it will take 1-2 quarters for new model launch and marketing/branding transition. In our base case, we estimate 80mn units for new Honor in FY21E (vs Huawei 190mn in FY19), and Xiaomi/Apple will grow 34%/15% YoY to 200mn/220mn in FY21E given strong 5G product pipeline, global sales network and established ecosystem.
- Tight component supply and de-spec trend to persist into 1Q21E. We expect tight semi supply (esp. SoC, PMIC) to continue into 1Q21E due to 1) strong post-pandemic recovery in segments like automobile and home appliances, 2) handset brands’ inventory build to take Huawei share, 3) Honor spinoff to boost restocking, and 4) strong iPhone demand into 1Q21E. While 5G SoC cost pressure will alleviate in 1Q21E, we expect de-spec trend on most components will continue into 1Q21E given weak demand of high-end smartphone amid ongoing global macro weakness.
- Prefer Xiaomi, Sunny Optical, Luxshare, Goertek and BYDE. We expect overall tech demand remain solid across segments and component supply will remain tight in 1H20E. While most high-end smartphone components will be under pressure in 1Q21E due to ongoing de-spec trend, we suggest to focus on share gainers and Xiaomi/Apple plays. Our picks include Xiaomi for global share gain from Huawei, Sunny Optical for iPad lens order win, Luxshare/Goertek for TWS/AirPods/Watch, and BYDE for share gain in iPad OEM and Watch components.
