Computer Parts/Electronics: Computer Parts Inventories to Monitor During Remediation
Concerns about a decline in sales of technology products
Our technology shipment growth forecast for 2022 has been revised down due to a high comparable base. Sales of major tech products (laptops, TVs over $1,500, tablets, etc.) are up 20-50% in 2021 from pre-pandemic levels. Sales could fall by more than 10% year-on-year for some products this year. Given the uncertainty over the timing of a recovery in demand, we recommend focusing on suppliers of computer components and parts that can counter the current weakness in sales of technology products.
Bottom-up strategy for hardware stocks
1) Foldable devices: differentiation in shipment growth
Clear directionality is the biggest boost for the IT industry. Samsung Electronics is expected to maintain its lead until this year. Global manufacturers, including Chinese companies, are expected to increase sales from 2023. Additionally, foldable devices are likely to diversify with sliding, dual-curved, and wide screens in the future. We see strong growth potential for the foldable device market.
2) DDR5: Price increase of 30 to 55%
The unit price of DDR5 was expected to increase by 20-30% considering a 20% increase for DDR4. But the rise in prices turned out to be much higher than expected, resulting in earnings momentum in 2022 that will last four years. With server-use DDR5 components expected to ship starting in 3Q22, related parts vendors should see an increase in ASP levels as the product line improves.
3) MR (AR/VR): upcoming release of Apple glasses
Sales of mixed reality (MR) devices are expected to increase in volume, along with those of foldable devices. Apple is expected to introduce Apple Glasses in 1H23.
4) Diversification of the product mix: Supply of new components
Regardless of the slowdown in demand for technology products, some parts suppliers will change the direction of their business in 2H22 with shipments of new components. We pay attention to companies poised for a turnaround in earnings in 2H22 or 2023. Significant technological advances are being made in camera, automotive electronics and communication parts.
Investment strategy: Focus on the beneficiaries of technological advances
We recommend taking a selective approach to companies that stand to benefit from technological advances, with an emphasis on sourcing new components, gaining market share and products subject to market constraints. supply. These stocks should become more attractive during the correction. Those in our favor are:
-Foldable devices: Fine Technix, KH Vatec, Interflex, Segyung Hitech
-DDR5: TLB (highest share of sales of 55% from printed circuit boards for DDR5)
-Sales contribution from new companies: Jahwa Electronics, Sekonix, WiSol
(BH, LG Innotek, Simmtech, Isu Petasys and Abco Electronics were dropped from our list as they gained more than 100% since our previous reports were published.)