2 March 2017 Asia Pacific/Taiwan Equity Research Technology Asia Handset Supply Chain Research Analysts SUPPLY CHAIN RESEARCH Randy Abrams, CFA 886 2 2715 6366 Mobile World Congress 2017: A long-term [email protected] Keon Han evolution in hardware 82 2 3707 3740 [email protected] Figure 1: Mediatek’s share performance around MWC vs sales YoY Jerry Su 20%Mediatek stock performance entering/exiting MWC (T-30 as benchmark) 60% 886 2 2715 6361 45% [email protected] 10% 30% 15% Thompson Wu 0% 0% 886 2 2715 6386 -15% [email protected] -10% -30% -45% Pauline Chen -20% -60% 886 2 2715 6323 2010 2011 2012 2013 2014 2015 2016 2017 [email protected] T-5 T+5 T+30 Sales YoY (%) Sang Uk Kim Source: Company data, Credit Suisse estimates 82 2 3707 3795 The Mobile World Congress (MWC), the wireless industry’s largest annual event, [email protected] took place this week in Barcelona. Our team met component, IC, smartphone OEM Haas Liu and infrastructure suppliers. We profile implications for the Asian supply chain. 886 2 2715 6365 [email protected] ■ Modest product launches unlikely to jumpstart momentum. Lack of exciting Harvie Chou launches was evidenced by the most crowded new product demo—the Nokia 886 2 2715 6364 3310, a US$52 reborn feature phone. Among Android brands, Sony, LG and [email protected] Huawei focused on camera with dual camera flagships and Lenovo/Motorola Thurston Lee and TCL with mid-high-end incremental refreshes. Focus clears the way for 886 2 2715 6352 Samsung’s GS8 announcement on 29 March and the new iPhone 8 [email protected] anniversary edition with content upgrades adding US$50-100 to the BOM. ■ Mediatek contained by slowing China smartphones, Qualcomm leadership and a new Spreadtrum/Xiaomi chip. Mediatek’s new x30 flagship chipset on 10nm is seeing limited design traction with only planned launches from Vernee (late April availability), LeEco and Meizu (June availability). Qualcomm maintains leadership on S600/S800 series, allowing it to stay aggressive pricing the entry tiers. Suppliers echoed sentiment that China smartphones remain slowed by excess inventory, rising panel/DRAM price and FX pressures in some emerging markets. Spreadtrum unveiled its Intel x86 based chipset scheduled for devices for Sept/holiday volumes. 10nm activity is modest with Huawei P10 using the 16nm Kirin 960 and only Sony using the 10nm Snapdragon 835, with LG using the mature 14nm S821. Xiaomi's Mi5C adopts in-house Surge S1, octa-core SoC on TSMC's 28nm HPC, to compete with QCOM/Mediatek in the mid to high-end. ■ Network spend in a lull ahead of 5G. CS forecasts a low single-digit decline in wireless network spend in 2017, consistent with OEMs at the show. Major carriers, equipment suppliers and chipset companies committed to pull in a non-standalone 5G standard that uses 4G radio and packet elements to bring forward trials and first commercial chipsets/devices in 1H19. Nevertheless, full scale deployments and wide volume of 5G spec may take 1-3 years longer. ■ Stocks better on a pullback. We stay cautious on Mediatek with still a few quarters until its new architecture can lift profitability and recently trimmed TSMC estimates due to excess fabless and China smartphone inventory. We could see better entry on TSMC post results reset. In the meantime, we stay with component suppliers benefiting from rising content to offset slowing units including memory (Hynix), casing (Foxconn Tech, Lens Tech), acoustics (AAC), camera (Sunny Optical, Largan), and Hon Hai (high iPhone 8 share). DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 2 March 2017 Focus charts and tables Figure 2: Mediatek’s share price performance Figure 3: Spreadtrum introduces its SC9861A around MWC Mediatek stock performance entering/exiting MWC (T-30 as benchmark) 20% 60% 15% 45% 10% 30% 5% 15% 0% 0% -5% -15% -10% -30% -15% -45% -20% -60% 2010 2011 2012 2013 2014 2015 2016 2017 T-5 T+5 T+30 Sales YoY (%) Source: Company data Source: Spreadtrum Figure 4: New LTE smartphones from global tier 1s at the MWC – Mediatek still not penetrated into flagship yet Company Lenovo Xiaomi BlackBerry LG Coolpad Nokia Alcatel Alcatel Alcatel ZTE - Nubia Gionee Vernee Huawei Xiaomi Model name Motorola G5 / G5+ Redmi 4x KEYone G6 Cool S1 3/5/6 U5 A3 A5 LED N1 Lite A1/A1 Plus Apollo 2 P10/P10 Plus Mi5c Announcement Feb-2017 Mar-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Mar-2017 Shipment Mar-2017 TBD Apr-2017 1Q17 TBD 2Q17 TBD TBD TBD Mar-2017 Mar-2017 42,856 Mar-2017 TBD Operating System Android 7.0 Android 6.0 Android 7.1 Android 7.1 Android 6.0 Android 7.0/7.1 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 7.0 Android 7.0 Android 7.0 Android 7.0 Display 5.5" TFT-LCD 5" TFT-LCD 4.5" TFT-LCD 5.7" TFT-LCD 5.5" TFT-LCD 5"/5.2"/5.5" TFT-LCD 5" TFT-LCD 5" TFT-LCD 5.2" TFT-LCD 5.5" TFT-LCD 5.5" AMOLED 5.5" TFT-LCD 5.1"/5.2"/5.5" AMOLED 5.15" TFT-LCD Pixels 1080*1920 720*1280 1080*1620 1440*2880 1080*1920 1080*1920 480*854 720*1280 720*1280 720*1280 1080*1920 1440*2560 1440*2560 720*1280 Camera 13 MP 13MP 12 MP Dual 13 MP 16 MP 16 MP 5MP 13MP 8MP 8MP 13MP 21 MP Dual 20 MP + 12 MP 12 MP Battery 2800/3000 mAh 4100 mAh 3505 mAh 3300 mAh 4070 mAh 3000 mAh 2050 mAh 2460 mAh 2800 mAh 3000 mAh 4010 mAh 4000 mAh 3750 mAh 2860 mAh RAM 3GB 2/3GB 3GB 4GB 4/6GB 2GB 1GB 1.5GB 1GB 2GB 4GB 6/8GB 4GB 3GB ROM 16GB/32GB 16/32GB 32GB 32GB 64/128GB 16GB 8GB 16GB 8GB 16GB 64GB 64/128GB 64GB 64GB Snapdragon MT6737/ Processor Chip Snapdragon 435 Snapdragon 625 Snapdragon 821 Snapdragon 821 MT6737M MT6737 MT6753 MT6737 Helio P10 Helio X30 HiSilicon Kirin 960 Xiaomi Surge S1 430/635 Snapdragon 430 Multi-core Octa Octa Octa Quad Quad Quad Quad Quad Octa Quad Octa Deca Octa Octa CPU Speed 1.4GHz 1.4GHz 2.0GHz 2.35GHz 2.35GHz 1.3/1.4GHz 1.1GHz 1.25GHz 1.5GHz 1.25GHz 2.0GHz 2.2GHz 2.4GHz 2.2GHz Retail Price (USD) $178/$273 $102/$130 $632 TBD TBD $150 TBD TBD TBD $180 $330 $405 TBD $220 Source: Company data, Credit Suisse research Figure 5: 4G merchant chipsets a duopoly, although Qualcomm continues holding share pretty well Spreadtrum Mediatek Qualcomm SC9830/9832 Helio P10 / P20 Helio X10 Helio X20 / X25 Helio X30 Snapdragon 61x Snapdragon 65x Snapdragon 808 Snapdragon 810 Snapdragon 820 / 821 / 835 Infocus Bingo 21 Archos Diamond 2+ Creo Mark 1 360 N4 LeEco Le 2S Asus Zen Fone 3 Asus Zen Pad Z8 Acer Jade 2 Gigaset ME pro Asus ZenFone 3 Intex Cloud String Elephone M3 Elephone Vowney Alcatel Flash 3 Meizu Pro 7 Asus Zenfone Max Coolpad Cool1 Acer Jade Primo HTC Butterfly 3 Coolpad Cool S1 Lephone W7 Gionee A1 / A1 Plus Gionee E8 Elephone P 9000 Vernee Apollo 2 Blackberrt KEYone Gionee Elife S6 Blackberry Vienna Huawei Nexus 6P HP Elite x3 Lephone W9 Gionee S6 Pro HTC One E9+ Elephone P9000 HTC One A9 Jide Remix Pro Lenovo Vibe X3 LeEco Cool 1 HTC M10 Micromax Canvas Mega 2 Gionee S8 HTC One M9+ InFocus M888 Huawei G9 Plus LeEco Le 2 LG Angler LeTV 1S Pro HTC Nexus Micromax Unite 4 Pro Gionee W909 HTC One ME LeEco L2 Huawei Nova NuAns NEO LG G4 Microsoft Lumia 950 XL Lenovo Zuk Z2 Philips S326 Imoo M1000 HTC One X9 LeEco Le2 Huawei Nova Plus Oppo R9 Plus LG Nexus 5X Motorola Droid Turbo 2 LeTV Le Max Pro Rockcel Quartzo InFocus S1 Letv 1S Meizu M3 Lenovo Lemon 3 Sony Xperia X LG V10 Motorola Moto X LG G Flex 3 Samsung Galaxy J2 LEAGOO Elite 1 Lumigon T3 Meizu MX6 Lenovo Phab Plus Sony Xperia XZ Microsoft Lumix 950 OnePlus Two LG G5 Samsung Z2 Lenovo K5 Note Meitu V4 Meizu Pro 6 Lenovo Vibo K5/Plus Vivo V3 Max Motorola Moto X Style Samsung Galaxy S6 Active LG G6 Xolo Era 1X LG X Power with Sprint Meizu MX5 QIKU N4 Micromax YU Yureka Vivo X7 Nextbit Ember Robin Sharp AQUOS ZETA LG V20 Meitu M6 Meizu MX6 Sharp Aquos Z2 Moto Z Vodafone Plat 7 Qiku Flagship Sony Xperia Z5 Moto X 2016 Meizu Blue Charm 2 OPPO R7 Plus Smartcong Flagship Motorola G5+ Xiaomi Mi Max Samsung Galaxy N5 edge Vivo Xshot 3s Nexus 6P Meizu M3 Note PPTV PP King 7s Vernee Apollo Lite Oppo F1 Sony Xperia W+ Xiaomi Note One Plus 3 Meizu Note 6 Sony Xperia M5 Vivo X7 Oppo R7s Xiaomi 4C ZTE Axon Oppo Find 9 Motorola X 2016 Sony Xperia Z4 Compact Xiaomi Redmi 4 Samsung Galaxy A5 ZTE nubia Z9 Samsung Galaxy S7 Oppo R9 Xiaomi Redmi Note2 Xiaomi Redmi Pro Samsung Galaxy A8 Samsung Galaxy S8 Sony Xperia C6 Xiaomi Redmi Note3 ZOPO Speed 8 Samsung Galaxy C7 Sony Xperia X Perf.