KUCHING: Despite the slowdown in the smartphone industry, analysts believe that there are still opportunities for growth.
In a recent report, the research arm of TA Securities Holdings Bhd (TA Securities) highlighted that the sector remains one of the fastest growing segments, driven by smartphone adoption in emerging markets.
“There are also opportunities for companies to outpace the industry through market share gains within Chinese vendors and higher radio frequencies (RF) content within smartphones.
“Better than expected initial demand for the iPhone 7 could potentially bode well for smartphone sales in the second half.
“Moreover, sales should also be supported by the weak ringgit environment, which we expect to continue on account of expected US interest rate hikes,” it opined.
It also noted that while there are concerns lingering on the current slowdown in smartphone sales, with Gartner reporting that worldwide smartphone sales is expected to grow at a slower seven per cent year-on-year (y-o-y) in 2016 (compared with 14.4 per cent y-o-y in 2015), smartphones are still one of the fastest growing segments in the industry.
“Overall smartphone ownership rates have been rising, with the median increasing from 21 per cent in 2013 to 37 per cent in 2015.
“Despite that, there is still a 31 percentage points gap between ownership rates between emerging (37 per cent) and advanced economies (68 per cent) in 2015.
“In emerging markets, smartphone sales is expected to be driven by first time buyers as they convert from feature phones to smartphones – aided by the increasing affordability of smartphones.
“A particular country of interest is India. Housing the world’s second largest population, smartphone ownership in the country remains low at 17 per cent. Out of the people that own a cellphone, 78 per cent of individuals in India are still using feature phones.
“India is widely tipped to become the second largest smartphone market by value over the next few years,” TA Securities explained.
The research team also pointed out that manufacturers could capitalise on growing smartphone content.
“RF content is expected to benefit from the growth in LTE devices and advent of carrier aggregation. The value of RF content in a premium 4G smartphone is estimated to be 20-folds more than the value within a legacy 2G/3G smartphone.
“The RF total addressable market (TAM) is estimated by Qorvo to grow at a compounded annual growth rate (CAGR) of 15 per cent between 2014 and 2018,” it added.
Overall, TA Securities maintained an ‘overweight’ call on the sector.