The emerging 5G transition will be a boon to Inari and with the recent doubling of the capacity of its SiP assembly line and ample RF testers, the group is expected to see a repeat super growth cycle, analysts say. — AFP photo
KUCHING: The emerging 5G transition will be a boon to Inari Amertron Bhd (Inari)and with the recent doubling of the capacity of its system in package (SiP) assembly line and ample RF testers, the group is expected to see a repeat super growth cycle, analysts say.
In its update on the group, Affin Hwang Investment Bank Bhd (Affin Hwang Capital) expected Inari to see a repeat of its previous strong revenue growth cycle, last seen in the early phase of the transition from 3G to 4G technology.
“Over a 10-year horizon from 2009 to 2019, we saw Inari’s RF revenue expanding at a compound annual growth rate (CAGR) of 14.2 per cent,” the research firm said.
“However, revenue growth grew at a faster CAGR of 23.9 per cent in the initial five years compared to 5.2 per cent in the second half of that same period.”
Affin Hwang Capital recapped that Inari as a subcontractor to a major player with premium RF filters, leading smartphone brands that were the early birds in terms of adoption of 4G technology in their smartphones, contributed to this growth.
The research firm noted that naturally, average selling prices (ASPs) would have been higher at the onset of this technology, helping with the quicker expansion.
“However, also contributing to this spurt was the expansion in the number of frequency bands to accommodate the functionality of 4G phones.
“In tandem with this, the RF front-end modules became a lot denser with more components, leading not merely to a higher build of material but also longer testing durations.”
In Affin Hwang Capital’s view, the transition to 5G technology will thus spark a new wave of growth for Inari.
The research firm opined that the repetition of increased frequency bands, more complex RF components and the need for the premium RF filters required on the spectral bands that 5G operates on will likely be key drivers.
“While the number of new 5G related frequency bands appears minimal, the comparison is based on current available 5G devices and on an Android platform.
“In 2013 when the North US smartphone brand launched its first 4G phone, the number of frequency bands increased by two-fold that of its competitors as it was the manufacturer’s strategy to launch a universal phone, one that could be used globally.”
The research firm would not rule out a similar strategy by the North US smartphone brand’s 5G offering this year.
It noted that Akoustis Technologies is already projecting a 25 per cent increase in RF content per device in an early 5G phone over a premium 4G device.
“While most major smartphone brands have thus far launched 5G devices only in their premium line-up, we are encouraged that the entire line-up for the North US smartphones this year will be 5G-ready covering at least the Sub-6 wavelength (Greater China Smartphones July 7, 2020).
“Likewise, Samsung is expected to have five 5G models in its line-up in 2020 versus three in 2019. On the whole, Daiwa expects penetration of 5G handsets to increase from 14 per cent in 2020E to 75 per cent by 2025E, which bodes well for the RF filter segment.”
Affin Hwang Capital highlighted that to cater to this expansion, Inari has doubled the group’s SiP assembly capacity by adding an additional eight production lines at its P34 plant.
“These eight new lines have been fully qualified and are ready to be commissioned.”
The research firm gathered that there may even be a need for an additional SiP line to accommodate a sudden surge.
“On the testing front, the number of testers have been progressively increased over the past three years, raising the effective capacity by nearly 50 per cent.”