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[Mobile component industry]Three firms well positioned to defend profitability and increase shipment volume

February 22, 2016 12:04lFebruary 22, 2016 12:04
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As the smartphone market has matured to the point where future growth in DMs will likely be limited, we expect industry players to refocus on EMs. To better differentiate their low- and mid-end smartphone offerings, we predict that handset makers will increasingly adopt: 1) biometric recognition modules; 2) wireless charging technology; and 3) more advanced camera modules (eg, dual-lens cameras). Such trends should help related component makers both defend their profitability and increase their shipment volume.


▶ Competition in low/mid-end smartphone segment to intensify?component makers to benefit

To defend (or increase) their global market share, we expect smartphone makers to focus more on EMs going forward. Of note, EMs currently have a relatively low smartphone penetration rate (vs that in DMs), and the market is mostly dominated by low- and mid-end smartphones.


Intensifying competition in the low/mid-end smartphone segment is expected to lead to smartphones coming with greater hardware specifications and a more diversified array of hardware. We predict that these trends will enable related component makers to both defend their profitability and increase their sales. We suggest paying attention to the following developments for low- and mid-end smartphones: 1) increasing adoption of biometric recognition modules; 2) growing adoption of wireless charging modules; and 3) higher specification camera modules (eg, dual-lens cameras).


▶ Beneficiaries of intensifying competition in low/mid-end smartphone market: Partron, CrucialTec, and Amotech

Within the biometric recognition domain, we expect the adoption of fingerprint recognition modules to be particularly rapid. The global penetration rate of fingerprint recognition modules in the smartphone market currently stands at just 22%, suggesting that there exists significant room for market growth. For wireless charging, although the hardware is currently only used in Samsung Electronics (SEC)’s 2015 flagship models, we expect the hardware to increasingly be mounted in low- and mid-end smartphones. Turning to camera modules, enhanced photo resolution (ie, greater pixel number) should help camera module makers defend their ASPs. Moreover, as the dual-lens camera adoption rate is expected to surge in 2H16, the camera module shipment volume is likely to grow strongly. We predict that Partron, CrucialTec, and Amotech will prove to be the main beneficiaries of the above-stated developments.


Partron: We expect Partron to defend its ASP thanks to a growing shipment portion of 13MP camera modules featuring optical image stabilization (OIS) units. When the firm’s major clients start using dual-lens cameras, the company’s module shipment volume should climb rapidly. And, sales of its fingerprint recognition modules are set to grow strongly thanks to the increasing adoption rate in the low/mid-end smartphone market.


CrucialTec: A large portion of its clients is composed of Chinese smartphone makers. The rising penetration of fingerprint recognition modules in the Chinese smartphone market is expected to drive the company’s future top-line growth.


Amotech: In line with the growing need to equip low- and mid-end smartphones with a more diverse range of hardware, we expect wireless charging technology to be increasingly adopted by this segment. Such a trend should help expand the company’s shipments of wireless charging modules.
j.choi@nhwm.com
Source: NH Investment & Securities Co.